Wednesday, January 7, 2015

Contrarian View: Junk-Bond Baby Dumped With Bathwater in Oil Rout, Lillard Says | Light Crude at Long-Term Support?

From Bloomberg:  "Junk-Bond Baby Dumped With Bathwater in Oil Rout, Lillard Says"

“The market has thrown the baby out with the bathwater,” Mike Lillard, chief investment officer of Prudential Fixed Income said today in New York as company executives discussed their outlook for 2015. “If the economy is fine, it’s strong, you’re going to see issues in the energy sector, but not overall.”

The above link and quote provide a contrarian view to the now apparently widespread and popular opinion on the internet that high yield bonds are all threatened by the drop in oil prices and this apparent problem ("contagion") could spread to the rest of the risk-based market (i.e., stocks)

In addition, we note that light crude oil is at or near long-term support level and very oversold conditions as shown on the daily chart below (yesterday's spot price).  If support holds and a rebound in oil price occurs from here, this could also alleviate concerns regarding oil-related high yield bond defaults.

Click Chart to Enlarge

Not Investment Advice | Important Disclaimer: 
The content in this article, including the identification and discussion of any specific security (e.g., bond fund), is NOT meant to be and should NOT be construed and/or used as investment advice. This article is for general information and educational purposes only. Please read the Disclaimers  for in their entirety. The U.S. Securities and Exchange Commission website has guidance on selecting an investment adviser.

Financial Disclosure:
The author/publisher has positions in several corporate high yield bond mutual funds at the time this article was written.

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