Daily Charts - Credit Risk Pricing Cycles
1.Credit Risk Pricing Cycles
Credit Spreads go through cycles as investors adjust the risk premium they demand over and above "risk-free" treasury yields to take on credit risk.
These cycles echo and mirror the equity market cycle, but feature the same drivers, behavioral patterns, and periods of opportunity vs risk.
As things stand now we are going through the trough, but the time to be tactically concerned is when it starts un-troughing 🧐 🤓 ✍️ 🗒️
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2.That is a shocking divergence
Makes you wonder how sustainable it is (the blue line is to a great degree propped up by big tech)
Also makes you wonder what it would take for the black line to turnaround...
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3.Why bother with Risk Management?
Math.
The steeper the loss, the bigger the gain required to just get back to square.
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4.Even if this isn’t a top or turning point, it’s the type of setup that makes a market vulnerable to any change of mind in the masses.
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