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  • US High Yield's Sharpe Ratio Has Fallen As We Expected Since Late June 2014. However It's Now Nearing An Oversold Level

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    US High Yield bonds have become oversold and their sharpe ratio is nearing an oversold level compared to the MSCI World Index, suggesting they may be due to rebound. However, demand for downside protection has fallen significantly and market volatility measures like the ISKEW index have dropped sharply, indicating another near-term decline in risk assets is possible, which could provide a buying opportunity to get into US High Yield at better prices.

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    US High Yield bonds have become oversold and their sharpe ratio is nearing an oversold level compared to the MSCI World Index, suggesting they may be due to rebound. However, demand for downside protection has fallen significantly and market volatility measures like the ISKEW index have dropped sharply, indicating another near-term decline in risk assets is possible, which could provide a buying opportunity to get into US High Yield at better prices.

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    US High Yield's Sharpe Ratio Has Fallen As We Expected Since Late June 2014. However It's Now Nearing An Oversold Level

    Uploaded by

    api-245850635
    US High Yield bonds have become oversold and their sharpe ratio is nearing an oversold level compared to the MSCI World Index, suggesting they may be due to rebound. However, demand for downside protection has fallen significantly and market volatility measures like the ISKEW index have dropped sharply, indicating another near-term decline in risk assets is possible, which could provide a buying opportunity to get into US High Yield at better prices.

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    US High Yields sharpe ratio has fallen as we expected since late June 2014.

    However its now nearing an


    oversold level. Take a look below at the actual ratio and its spread to the MSCI World Index.

    HOWEVER, with the demand for protection falling hard over the past few weeks, I think we are due for another
    risk asset decline in the near-term. The ISKEW index (measures imp vol across equities and currencies) just fell
    to -2 st.devs from its 60-day average. So Id look to take advantage of any equity sell-off to jump into US High
    Yield.

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