TFMkts: HY Bonds, ETF’s, and CDS

Lot of attention being focused on HYG and JNK today.  LQD also taking a beating (on a spread basis).  But the ETF’s have been massively outperforming CDS, which are actually stable today.

There are CDS vs ETF trades going through.  There is selling of actual bonds.  There is fear of Europe.  There is arb activity pushing price lower while the ETF is at a discount.

It is meaningful, but for the big global macro players, they have been spreads widening already.  The fact that it has been leaking into more traditional cash markets is worrying, but today is largely a catch up day.