Bank Of America Just Laid Out Why Its Clients Are Wrong About The Bond Market

BI ^ | 1-12-2016 | Matt Turner

[blam]

Matt Turner
January 12,2016

Bank of America Merrill Lynch's high-yield team is bearish.

So bearish, in fact, that it is getting into debates with its clients and colleagues over exactly how bad it is.

"It is our fear that many of the signs we see in high yield ultimately foreshadows further economic and risk asset malaise in 2016 and 2017," the team led by Michael Contopoulos said Monday in a note.

"However, as we sort through the financial press releases and discuss our views with investors and internally, we realize our disposition is perhaps on the unconventional side of where most currently sit."

Here's why.

Nope

The firm first tackles the argument that it is too bearish and that the problems in the high-yield market are isolated to energy.

WRONG!

"Never was the 'problem' just with Energy, as Metals and Mining and non-food Retail had been reeling for some time," the team wrote. "As the year waned, the weakness spread to isolated pockets of Wireline and Technology, then Wireless, Chemicals, Pharma and Cable."

(snip)

[blam]

Bank Of America once named the Bank Of Italy still operates today under the charter of the Bank Of Italy.

[blam]

Doctor Copper

Market lingo for the base metal that is reputed to have a Ph.D. in economics because of its ability to predict turning points in the global economy. Because of copper's widespread applications in most sectors of the economy - from homes and factories, to electronics and power generation and transmission - demand for copper is often viewed as a reliable leading indicator of economic health. This demand is reflected in the market price of copper. Generally, rising copper prices suggest strong copper demand and hence a growing global economy, while declining copper prices may indicate sluggish demand and an imminent economic slowdown.

[blam]

Tumbling oil trades below $30 a barrel for first time in 12 years

[Blood of Tyrants]

The price of practically any raw material could be said to be an indicator of the market.

[musicman]

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[stocksthatgoup]

what bonds are they shorting now? lol

[familyop]

Very interesting to have a peek at part of the real economy. Thanks!

[taxcontrol]

So for those of us who have limited 401K options, where does one stick their money now? There don’t seem to be a whole lot of positive options on the table.

[SaveFerris]

I like that one.

[familyop]

"what bonds are they shorting now? lol"

I saw something over the last day or two about "JNK" being low. ;-)

[musicman]

(Thanks!!)