{"id":9207,"date":"2019-07-30T21:35:52","date_gmt":"2019-07-30T21:35:52","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=9207"},"modified":"2019-07-30T21:35:52","modified_gmt":"2019-07-30T21:35:52","slug":"watching-high-yield-credit-after-the-fomc-announcement-wednesday-july-31-19","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=9207","title":{"rendered":"Watching High Yield Credit after the FOMC announcement Wednesday, July 31, ’19"},"content":{"rendered":"
\"\"<\/a>
Click to open \/ enlarge<\/figcaption><\/figure>\n

 <\/p>\n

The JNK high-yield ETF looks the best of our three charts today, already having transcended the downward sloping trend line off the 2014 peak.<\/p>\n

 <\/p>\n

\"\"<\/a>
click to open \/ enlarge<\/figcaption><\/figure>\n

 <\/p>\n

The HYG is sitting just above resistance at the downward sloping trendline off the 2014 top as well. Like JNK it’s not yet a convincing breakout.<\/p>\n

\"\"<\/a>
Click to open \/ enlarge<\/figcaption><\/figure>\n

 <\/p>\n

The short-term high-yield ETF (SHYG) is trying to trade above its 200-week moving average, but like the longer-duration high-yield ETF’s HYG and JNK, it hasn’t yet broken out convincingly.<\/p>\n

Summary \/ conclusion:\u00a0 <\/strong><\/em>When the FOMC announces their decision on July 31, 2019 at 1 PM central time, I would expect the SP 500 and the major equity indices to respond positively to the 25 basis point reduction, unless the US economy is already in a recession, which would be hard to believe given jobless claims, a 3.6% – 3.8% unemployment rate, and a US consumer as strong as they are at present.<\/p>\n

What i’ll be paying attention to is to see if these high-yield ETF’s can solidly break above these various resistance levels and sustain the moves even though all three are overbought.<\/p>\n

Liquidity is good for credit typically, so if the high-yield asset class sells off tomorrow and the days following the FOMC announcement, it will be an important sign.<\/p>\n

The interesting action might be in the short-end of the Treasury curve and the Treasury curve itself.<\/p>\n

Looking at the YTD returns for corporate high-grade credit and corporate high-yield credit, YTD returns are almost identical (both just over 10% as of last Friday) thus that tells me corporate high-grade has benefited greatly from falling interest rates (i.e. longer duration) as much as the credit spreads.<\/p>\n

I wonder if we don’t see that reverse a little bit starting Wednesday afternoon and high-yield start to show better relative performance than corporate high-grade.<\/p>\n

Just thinking out loud.<\/p>\n

Thanks for reading.<\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

  The JNK high-yield ETF looks the best of our three charts today, already having transcended the downward sloping trend…<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[50,193,40,39],"tags":[],"class_list":["post-9207","post","type-post","status-publish","format-standard","hentry","category-bond-markets","category-corporate-high-yield","category-hyg","category-jnk"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/9207","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9207"}],"version-history":[{"count":3,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/9207\/revisions"}],"predecessor-version":[{"id":9213,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/9207\/revisions\/9213"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9207"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9207"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9207"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}