Buzz and Banter
The VIX index is beginning to perk up, confirming the indication for a sharper increase in volatility.
A reason not well documented for the improvement in corporate bond spreads is the new buying being done by hedge funds that buy distressed paper and hedge some of the risk away by buying puts on the stock. It seems that as these bond spreads began to improve from extreme levels, more money began to flow into these types of funds and hence, they put more money to work, further improving the spreads. Is this an indication of a better economy, or just the result of typical money flows chasing returns? Time will tell.
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