If the market was “seriously” bearish then shouldn’t more junk rated bonds be entering a stressed condition? Well yes that would be a logical conclusion but it appears that there is no material increase in the number of junk rated bonds trading at more than 1000 basis points above the yield of US treasuries as the Bloomberg TRACE index below depicts.
Perhaps the graph above suggests that the US Economy is not in trouble as the recent behaviour of equity and commodity markets suggests.
