Credit Spreads Suddenly Wider $HYG

This is a dramatic widening in credit spreads. And from the look of the chart, the trend in spreads is very bullish (wider).

That has a lot of implications. Mood shift. Flight away from risk to Treasuries. The LBO bid for companies falls or goes away entirely.

A correspondent writes in,

"I believe that most market observers have forgotten that in past rate cycles market driven rate increases always lead Fed increases. Here we have the junk bond market beginning the tightening well in advance of the Fed. Quality spreads will widen across the curve. Watch CDO issuance collapse as the risky tranches become hard to place. Watch for private equity deals to dry up. And what dry powder does that Fed have to stop it? Is the next QE going to purchase lower rated CDO tranches and junk bonds instead of treasuries and mortgages? Would a revived QE directed at treasuries do anything other than exacerbate the flight from junk and risk to safe and upwardly trending treasuries? This is how collapse starts as it moves from the fringes of the credit market toward the 'safe and secure' center."