After months of frothy conditions, credit valuations are finally beginning to correct. High Yield has traded down materially, as investors have had enough of ridiculous pricing in this market (see discussion).
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| HYG (HY ETF) |
HY CDX traded down to 97.5 after being as high as 101.5 a month ago - a material move even for this market.
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| Black line & RHS represents HY CDX price |
Investment grade spreads widened as well, with IG CDX increasing to 108bp from near 90bp a month ago. Some managers are taking chips off the table before the impending political mess of the US fiscal budget fight. It's finally time to get back to reality.
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