Could it be the right time to buy credit?
Investment grade corporate bonds spreads are at levels last seen in 1932. These happened to be in the middle of the great depression and proved to be an excellent point to buy credit.
SLXX was launched in March 2004 and as can be seen from the above chart, the price has fallen around 30% in the past three years, as bond markets often move before equity markets.
The slow stochastic and RSI are becoming oversold, which suggests that it is not far from stabilising, although there could be slightly further weakness to come first.
However, in light of the extensive measures being taken by governments and central banks and with corporate bond spreads where they are, I believe these levels could be offering excellent buying opportunities for both income and future capital growth.
Other Mark Allen articles
- A gold inflection point?
2009-04-10
