Our chart of the week displays a rally in one of the most important financial indicators nobody watches: high-yield bonds.
It's vital to watch the action in corporate bonds. The bond market represents the loans taken on by American businesses. It's a giant market... far larger than the one for stocks. If the price of bonds is trending lower, it means companies aren't making enough money to even pay the interest on their loans. If the price is trending higher, things are getting "less bad."
One excellent way to track the bond market is through the iShares High Yield Fund (HYG). This investment fund holds a basket of bonds issued by companies with considerable debt levels. As you can see from the chart, this fund is soaring right now... and sits at a 52-week high.
HYG's enormous rally reflects a big trend right now: Sure, the U.S. economy has problems (debt and debt are the two biggest). But before you get too bearish on things, listen to the market. As long as the bond market is healthy, we know interest is being serviced, loans are being paid back, and, at least in the short-term, the government's huge "E-Z-Credit" program is keeping things going.
It's vital to watch the action in corporate bonds. The bond market represents the loans taken on by American businesses. It's a giant market... far larger than the one for stocks. If the price of bonds is trending lower, it means companies aren't making enough money to even pay the interest on their loans. If the price is trending higher, things are getting "less bad."
One excellent way to track the bond market is through the iShares High Yield Fund (HYG). This investment fund holds a basket of bonds issued by companies with considerable debt levels. As you can see from the chart, this fund is soaring right now... and sits at a 52-week high.
HYG's enormous rally reflects a big trend right now: Sure, the U.S. economy has problems (debt and debt are the two biggest). But before you get too bearish on things, listen to the market. As long as the bond market is healthy, we know interest is being serviced, loans are being paid back, and, at least in the short-term, the government's huge "E-Z-Credit" program is keeping things going.
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