Multi-Asset Essentials

US High Yield Corporate Bond returns have reached the ‘stretched optimism’ zone, according to our Sentiment Barometer Indicator. The shift in investor sentiment is also seen in HYG ETF flows & put/call ratio.

Three HY market developments that question bullish sentiment: breadth not matching price action; lack of CCC participation; HY excess returns lagging behind Investment Grade over past 2 weeks.

Bund yields have fallen close to 200d MA, with SBI around neutral 50 level which hasn’t been breached for any length of time in nearly 2 years. UST 30Y-2Y slope hit -35bp level flagged 6 weeks ago as entry point for steepener.

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