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High-Yield ETFs Down for Third Week, Diverge from S&P 500


Junk debt ETFs such as iShares iBoxx High Yield Corporate Bond (HYG) and SPDR Barclays High Yield Bond (JNK) are on track for their third straight week of losses.

The high-yield corporate bond ETFs are also diverging from the S&P 500, so the credit market doesn’t seem to be confirming the latest bump higher in stocks.

Since May 3, the high-yield fund HYG is down 1.3% while SPDR S&P 500 ETF (SPY) is up 3.3%. [High-Yield Bond ETFs: S&P Still Sees Opportunities]

Technical analyst Chris Kimble at Kimble Charting Solutions in a note this week said it’s odd to see high-yield bonds deviate from the S&P 500. This often happens at key tops and bottoms in U.S. stocks, he said.

On Friday, he pointed out that the two junk bond ETs have formed so-called bearish rising wedges — two-thirds of the time prices will end up lower in the future. [iShares: Four Reasons to Still Hold High-Yield ETFs]

“If yields do move higher, the majority of the time stocks end up lower in price,” Kimble said. Bond prices and yields move in opposite directions. [New High-Yield Bond ETF Protects Against Rising Rates]

SPDR Barclays High Yield Bond


Full disclosure: Tom Lydon’s clients own HYG, JNK and SPY.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.