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Economists warn of unwanted bond differences, flashing signs of crises for the year 2007: “… just waiting for fire” – Invesco QQQ TRST, Series 1 (NASDAQ: QQQ), SPDR S & P 500 (Arca: Spy)

The long period of unusual unusual bonds can be the theater to reflect the dramatic market, according to this economist, which sees strange similarities with pre -crisis conditions in May 2007.

What happened: Credit differences for the bonds of companies with a high or unwanted return remained less Utavio Costa In the X.

According to Costa, such a trend was observed in May 2007, which follows a rise in fluctuations and satisfaction from the shattered market, which led to a sharp expansion of the differences. It draws a parallel between this incident to the current situation.

Costa added: “The narrow credit differences are similar to Tinder – just waiting for the shooting.”

See also: Founding investors with technology and financial stocks in the fourth quarter, while reducing positions in the health care sector, amid political uncertainty

Why do it matter: Unwanted bonds or high -yield bonds are a debt tool that has a less credit rating than the level of investment, while the spread of credit is the difference between the return on the unwanted bond and the return on similar American treasury bonds. The proliferation is an additional return for the high -yielding bond over the treasury bonds.

The deployment of low credit indicates that the bond is largely safer and investors are more confident in the company’s ability to pay its debts. A long period of low spread can indicate excessive risks by investors, as they may become satisfied with potential risks.

The chart is highlighted by the Costa Bloomberg US Corporate high -yielding in the average modified options, which were less than 3 % for 100 consecutive days. According to him, this is a warning sign of the next volatility.

Price work: As of February 21, the treasury returns for 10 years reached 4.43 %, while the return for two years was 4.20 %. Also, spdr S & P 500 ETF TRUST spy and Investco QQQ TRust ETF QQqWhich follows the S&P 500 and NASDAQ 100 index, respectively, on Friday. SPY decreased by 1.71 % to $ 599.94, and QQQ decreased by 2.07 % to $ 526.12, according to it. Benzinga Pro Data.

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