Research Excerpts

Widening Corporate Bond Spreads &
Q3 US Stock Market Direction

Posted on: Tuesday, August 16th, 2011

The following (green highlights) is a brief excerpt and one of 10 charts that were included in our Monday August 15th Keys To This Week report. It is one of 11 of our “Keys” to US stock market direction this week.

Keys To This Week, one of 7 different reports that Asbury Research produces for subscribers throughout the month, is a detailed outline of key market factors and corresponding charts — pertaining to the US stock market and market sectors, US interest rates, and the US Dollar — that are most likely to influence US financial market direction during the upcoming week.


excerpt from Asbury Research’s Keys To This Week
Subject: The US Stock Market
Date: August 15th 2011

Key #9: Credit Spreads. Widening BAA Corporate Bond Spread.  The green highlights on the chart below show that the BAA Corporate Bond Spread (Moody’s Corporate BAA bond yield minus the US 30-year constant maturity yield, red line, upper panel) widened out of its 6 month range last week.  This indicates increasing credit or repayment risk due to a deteriorating global growth outlook.  As the chart shows, the S&P 500 (black bars, lower  panel) historically declines when the spread widens above its 50-day moving average (blue line), which it is is now well above.

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