Dan Greenhaus of BTIG (@danBTIG) offers up a few facts about the market rally that will grab your attention:
- Purchasers of corporate debt are demanding the smallest interest-rate premium to comparable government bonds since 2007
- Some equity strategists are seeing their six month price targets (established early in December) nearly hit before the year is out.
- After JPM said on December 11 that high yield spreads would tighten in ’14 to 415 bps, that target was hit less than two weeks later
- In related news, high yield bond issuance, at $US324 billion, was the second highest ever and shows no signs of slowing down as yield hungry investors gobble up everything in sight.
- In the well-respected Value Line ranking system, lower quality stocks are outperforming their higher quality comrades (although this is not entirely a new phenomenon)
These are great nuggets. The market is moving higher at a blistering pace, and people are buying junk more aggressively than “quality.”
None of this is reason to be bearish, but it is a reason to be a bit concerned.
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