We've been talking recently about the big decline in oil and how it may be impacting other elements of the world's financial markets. There is one more observation that I thought may be worth adding to the list: the performance of Peritus High Yield (NYSE:HYLD) relative to oil. The chart below illustrates.
Although these high-yield bonds have outperformed oil, they have declined along with oil, exhibiting a clear correlation. This could be another way of trading the same fundamentals that drive oil -- especially since many of the companies issuing junk bonds are in fact in the oil business.
It's worth noting, though, that a strengthening dollar should be beneficial for high-yield bonds, especially in a world in which treasury bonds are issuing near-zero-percent returns.
Is a larger fundamental shift at play here?