Since the end of August, the i Shares Barclays 20+ Year Treasury Bond exchange-traded fund (TLT), which tracks the long end of the market, has lost 12% in value. Over the same span, the iShares iBoxx $ High Yield Corporate Bond ETF (HYG), a popular play on the junk market, is up nearly 3% in price.
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Which is the riskier asset isn't apparent from recent experience. As a result of the recent relative moves, Martin Fridson, the long-time high-yield bond observer at BNP Paribas, Wednesday declared the sector as being at "fair value," which is to say, no longer cheap. The spread of the Merrill Lynch U.S. High Yield Master II Index over comparable Treasuries had contracted to 569 basis points (5.69 percentage points) by Tuesday, which is about where it should be based on his model based on default risk, economic conditions and credit availability.In other words, after an 8 quarter one way ride (with the exception of the sell-off in Q2 '10 due to concerns about European contagion), the drive won't necessarily be as straight going forward.
Source: Yahoo Finance