It was just Friday morning that I wrote about high yield and how differently the “professional” market was trading compared to the “retail” market. HY17, the CDS index was trading at 88 at the time. It is trading at 84.5 right now, down 3.5 points. HYG was trading at almost 84, it got as low as 78 this morning and is currently at 79. It hasn’t caught up to the “professional” market yet, but seems to be much closer to reality. It does look like HYG has been a dumping ground for weakly distributed new issues, but other than that, and some of its usual concentration risks, it is looking like decent value here. I was actually encouraged that the increase in shares was used to mostly purchase recent new issues, rather than super illiquid CCC bonds, which is where the core of the market potential problem is.
Am working on a longer, more detailed look at the high yield market, but this drop has been precipitous enough that I wanted to get out in front and suggest that HYG may now represent value and isn’t as aggrressively priced as it was Friday morning, when so many other indicators – CDS and actual bonds were showing that real fair value was much lower than the 85.