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AA Corporate Bond Spread vs. S&P 500, Correlation To SPX, And The Spread's Rate Of Change — Investment Grade Risk Indicator

Instead of looking at high yield corporate bond spreads versus the S&P 500, let's now look at investment grade corporate bond spreads versus the S&P (SPX). Peter Tchir of Brean Capital recently told CNBC that we should be focusing on investment grade bond flows and spreads to measure stock market risk.

Below I put up a chart of the BofA/ML AA Corporate Bond Option Adjusted Spread (OAS) versus the S&P 500 (SPX), the AA corporate bond spread's correlation to the S&P, and the AA corporate bond spread's annual rate of change (52 week ROC).

When looking at the previous cycle, there was first a positive correlation between the AA bond spread and the S&P when the Fed started to raise rates, but it didn't end up killing the bull market. However, when the second positive correlation occurred and the AA corporate bond spread's annual rate of change (52 week ROC) made a new high, that marked the end of the up cycle. This cycle is different, but a similar p…

Energy And High Yield Indexes vs. Stock Market

CBOE Put/Call Ratio And VIX vs. S&P 500: Market Sentiment Indicators

Stock Market vs. YoY Percent Change Of Commercial And Industrial Loan Delinquencies (All Commercial Banks)

Stock Market vs. YoY Percent Changes Of Loan Delinquency Rates (Not Among The 100 Largest Banks)

Stock Market Exhaustion Indicators

Main Street & Wall Street Anxiety Average vs. Stock Market (Initial Claims, RVX, VXN)

Business and Consumer Volatility Index vs. Stock Market (Profits, GDP, Personal Income, Initial Claims)

ULTRA Cyclical Fear Indicator vs. Stock Market (CPI, Volatility Ratios, 10-2 Treasury Spread, and High Yield Bond Spreads)

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Key to the VIX: RVX/VIX Exhaustion vs. VIX and Stock Market

Cyclical Fear Indicator vs. Stock Market (CPI, Volatility Indexes and Bond Spreads)

Equity and Credit Risk Indicators: Russell 2000 Volatility Index and High Yield Bond Spread vs. Stock Market