NVDA Q3 Earnings Alert: Why our AI stock picker is still holding Nvidia stockRead More

Junk Bonds Versus Government Bonds: Why It Matters

Published 21/06/2024, 20:25
JNK
-
TLT
-

When stocks are in a bull market, we tend to see assets like growth stocks and junk bonds perform well as investors are in “risk-on” mode.

And oftentimes, these are the assets to start underperforming when the stock market goes through a sell-off or correction.

Today, we pit one of these assets (junk bonds via the SPDR® Bloomberg High Yield Bond ETF (NYSE:JNK)) against its counterpart government bonds via the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT). And we do this using a weekly price ratio chart.

JNK Vs. TLT Weekly Chart

As you can see, the ratio sent a very bearish message to TLT back in 2020 as JNK began outperforming TLT. And this has also coincided with a big equity bull market.

Fast forward to today, and we can see that the ratio formed a double top at (1) and is breaking down through up-trend support.

So I humbly ask, is the ratio now sending a bullish message to TLT? While simultaneously sending a potentially bearish message to equities? If support gives way at the neckline of the double top at (2), I suspect that it is. Stay tuned.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2024 - Fusion Media Limited. All Rights Reserved.