Junk Bonds Are Finally Starting To Care About Oil

[rangerrebew]

Junk Bonds Are Finally Starting To Care About Oil

by Tyler Durden
Jul 21, 2017 8:43 AM


Back in May, we pointed out an interesting observation made by Goldman: unlike late 2015 and most of 2016, when equities demonstrated surprising resilience to the swoon in oil prices, in 2017 OPEC's failure to stabilize oil prices finally hit energy equities disproportionately.  As Goldman said in mid-May, discussing the latest crude oil selloff, which has been "even more pronounced for longer-dated contracts reflecting increasing concerns over future balances in 2018 and beyond"... "in the HY market, the Energy sector has again outperformed its beta to crude over the past few weeks, a pattern that is reminiscent of previous oil sell-off episodes in the second half of 2016 and early 2017 (Exhibit 3)." Goldman also pointed out that the outperformance among energy high yield bonds "also contrasts with the sharp underperformance of Energy equities since the beginning of the year (Exhibit 4)."

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