From the desk of Steve Strazza @Sstrazza
We are always looking at intermarket signals and ratio charts for insight into various asset classes. We’ve recently written plenty about intermarket relationships that signal risk-appetite, or lack thereof, for stocks as well as others to get a read on yields.
Today’s Chart of the Day, High Yield Bonds (HYG) vs Short-Term Treasuries (IEI), is one of our favorite risk-appetite ratios.
Credit Market investors favor High Yield Bonds over Treasury Bonds during the “good times” – periods of strong economic growth, rising rates, etc. On the other hand, we know treasuries are a safe-have asset and outperform in environments where investors are uncertain and want a place to park their capital until the smoke clears.