MrStudPuffin

HY Junk Bond Spreads and SPX Correlation

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FRED:BAMLH0A0HYM2   ICE BofA US High Yield Index Option-Adjusted Spread
As you can see clearly on this chart, there is a high correlation between the BofA Option Adjusted Junk Bond Spread Index and the S&P500. While tough to use as a timing tool, when spreads widen to 4.5% or so, many times this is a good time to nibble in the S&P during a correction. When they reach 6%+, generally it is a good time to gorge. When they drop as low as 3%, it is usually a great time to reduce exposure.
Komen:
The lowest red line is 3.05%, middle is 4.2%, top is 5.3%.

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