IEF and HYG

IEF is an ETF that tracks the price of long-term Treasuries (7-10 years), while HYG tracks the price of high yield (junk) bonds.  During the flight to safety panic that occurred in late 2008, Treasuries soared (yields fell), while junk bonds tanked (yields rose).  This caused high-yield spreads to spike to levels not seen in decades.  As the market has regained some of its footing in the last couple of months, however, spreads have begun to come in, and the price charts of IEF and HYG highlight this convergence.  As shown, IEF (Treasuries) are getting close to testing February support, and the ETF is down from more than $100 to the low $90s.  HYG, on the other hand, has rallied from the low $60s to the high $70s since the March equity market lows.  If IEF breaks this support in the coming days, it will probably be a sign that the current trend will continue on for longer.

 

Comments

[Sean]

I think you mean IEF is getting down to the low 90s - i nearly had a heart attack reading this post, but then checked my quote on IEF... $93.61...

[Justin]

Yep, you're right Sean. Thanks for the heads up.