What’s the Junk Bond Market Telling Us about the Global Reach for Yield?

One ugly side effect found in the colossal ramp up in global quantitative easing (government bond buying) is in the disconnect between oil and high yield bonds. Credit risk is clearly rising but U.S. junk bond yields remain suppressed as international yield seekers have come to America with open check books.

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Oil and Junk Bonds

image (3) Oil in blue, junk bonds in white are singing a classic warning sign for us all. The disconnect is eerie. As long as desperate insurance companies in Tokyo and Frankfurt have an unending thirst for yield, U.S. junk will be mispriced. Short Junk Now.

Japan vs Germany

German 10s Japan 10s German and Japan 10 year bonds, married at -0.08%, a true global growth story.

In the end, central banks will be viewed as capital destruction vehicles. Far too much debt as been sold at ridiculously high prices. Bonds are more expensive today than internet stocks in 1999, sell Mortimer sell!

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