Thread: bond questions
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Old 03-10-2002, 02:17 PM
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Default Re: very correlated to stocks, I suspect



High yield spreads tend to be correlated with equities making it possible to do some relative value trades. This is one area that i think will grow among hedge funds and other fixed income players. With the models like KMV, which is essentially an option model of bonds and equities, gaining in popularity(since they have outperformed S&P and Moody's), trading corporates versus stocks will be come a more common trade.


Currently, there is still poor liquidity in corporates and the credit derivatives sector is still in its infancy but there is a tremendous push for more credit related products and should result in a much more efficient market going forward.
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