Credit Markets Are Still Risk-On: Why We're Calling A Strong Sell

Valuation Rewind205 FollowersFollow5ShareSavePlay(15min)CommentsSummaryCredit spreads remain well below historical medians, signaling a persistent risk-on environment.Investment-grade ETFs are heavily tilted toward BBB, the weakest layer of “quality.”.Rising yields and inflation create downside risk that outweighs current yield levels.High-yield bonds offer attractive YTM, but default risk could materially reduce realized returns.Broad bond ETFs embed equity-like risk, making them less defensive than investors assume. J Studios/DigitalVision via Getty Images Thesis This Seeking Alpha article is our tool to warn investors of the risks we see in the corporate bond market, especially in situations where we see a high probability for those risks to materialise. WeThis article was written byValuation Rewind205 FollowersFollowI started my career in asset management one year before the GFC. Since then, I have accumulated knowledge and extensive experience in financial analysis and portfolio management of equity, government bond, corporate bond, and money market funds. Fascinated by psychology and the way we make investment decisions. Passionate about sharing my knowledge. Please note that due to my financial institution's compliance requirements, I mainly do not invest in any kind of single stocks but only ETFs.Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.