It’s Day Two of a mega-massacre in the bond market. Here is a weekly chart of the HYD, the high-yield muni bond ETF. Look at that bar on the far right. The only thing comparable to this decline is the taper tantrum-driven sell off in 2013:
Then here is a chart of the HYG, one of the two leading junk bond ETFs (along with JNK). The sell off isn’t as aggressive … yet. But it’s starting to get dicey there:
Meanwhile, the carnage in emerging market bonds and stocks is really something to behold. Just look at this chart of the EMB, one of the two leading EM debt ETFs:
Will these moves “matter” for U.S. stocks? That’s the $100,000 question. My theory is this: Stocks can temporarily ignore sell-offs in Treasuries, particularly if they’re driven by expectations of stronger economic growth. But they can NOT ignore selling in junk, if it gets aggressive enough. So watch HYG. If it takes out that 200-day moving average line on the chart, it’s going to wreak havoc in stocks!
