caseyresearch.com / Justin Spittler / November 25, 2015
The junk bond market continues to show signs of cracking…
For months now, we’ve pointed to the decline of junk bond values as one of the biggest red flags in the entire market. The bond market is where companies, countries, and individuals go to borrow money. It’s far larger and more important than the stock market. The U.S. bond market, for instance, is about twice as large as the U.S. stock market.
If an economy, industry, or company is in trouble, warning signs usually appear in the bond market long before they show up in the stock market. We’ve focused specifically on the bond market’s riskiest offerings, junk bonds, which are bonds issued by companies with shaky balance sheets. They’re riskier than bonds issued by strong companies, so they pay higher yields.
When the economy slows down, companies in poor financial shape feel the pain first. That’s why junk bonds often point out problems before other assets do.
• On Monday, one of the biggest junk bond ETFs hit its lowest level in over six years…
SPDR Barclays High Yield Bond ETF (JNK) is the second-largest junk bond ETF in the U.S. It holds $10 billion worth of junk bonds. On Monday, it dropped to its lowest level since July 2009.
The chart below shows JNK’s performance since then. As you can see, it’s been in a downtrend since June 2014. JNK has fallen 9% this year. It’s lost 4% in the past three months alone.
The post We Haven’t Seen This Big Red Flag since the Great Recession appeared first on Silver For The People.
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