Loading...
Symbols:
Authors:

Stocks and Credit Spreads

by: Bespoke Investment Group May 27, 2008 | about stocks: HYG / IVV / SPY    

Bespoke Investment Group

About the author: From Bespoke:
Become a Contributor Submit an Article
  • Font Size:
  • Print

Since last year, there has been a steady relationship between stocks and credit markets.  As strains emerged in the corporate bond market, credit spreads rose and the bull market stalled.  When the credit markets all but froze up in March, stocks across the globe swooned and the S&P 500 even briefly hit bear market territory with a 20% decline using intraday prices. 

As the S&P 500 rallied off the March lows, credit spreads maintained their relationship with stocks and began to decline.  Last week, however, that relationship weakened.  While the S&P 500 fell by over 3%, the Merrill Lynch index of high yield credit spreads barely budged.  On the week, spreads rose by only seven basis points from 663 to 670 over treasuries. 

Furthermore, all of the rise happened on Friday when spreads rose by 11 basis points from a post Bear Stearns (BSC) meltdown low of 659 basis points.  While the market still faces multiple headwinds, the continued stability in high yield spreads suggests that credit issues might be heading to the rear view mirror.

High_yield_spreads_thru_0523

Related Articles

This article has 1 comment:

  •  
    May 28 02:43 AM
    Credit crisis is easing yes, but next leg down is where it affects the real economy and this wont show up much in credit spreads.
    Reply
More Comments on SPY ยป
More by Bespoke Investment Group

Investment Resources
Money Management 

Research 

Seeking Alpha provides these ads as a service to its leading contributors
Articles on related themes
Bonds 

Dollar/Currencies 

Earnings 

Economy