Credit looks strong, but yields explain all of its gain
High yield relative to investment grade (HYG/LQD) is 0.1% below its 52-week high, while SPY is 1.5% below its own. Over 52 weeks the ratio moved +5.5%, of which +6.0 points match the move in yields, leaving -0.6% for credit.
Credit risk appetite: high yield relative to investment grade (HYG / LQD)
Index, April 2007 = 100, weekly; rising = high yield outperforming
Equities: SPY drawdown from its running peak
% below the highest prior close, weekly
What it means · inference
- The apparent confirmation rests on duration, not risk appetite
- The ratio carries duration: it rises with yields
- Stripped of rates, the credit signal is negative
For investors · general, not personal financial advice
- Headline credit strength overstates risk appetite
- Credit is an independent check on equity risk appetite
What would change it
- HYG/LQD over 3% below its high, SPY near its own
- A yield spike lifting the ratio without better credit
Method
- What is measured: Ratio of the high-yield bond ETF (HYG) to the investment-grade bond ETF (LQD), dividend-adjusted, indexed to 100 in April 2007, weekly; with SPY's drawdown from its running peak on a separate chart. Through 30 Sep 2026.
- Ratio of dividend-adjusted closes, indexed to 100 at the first common date (both ETFs trade from April 2007 in the warehouse); weekly (Friday) sampling.
- Rate exposure: OLS slope of the weekly % change in the ratio on the weekly change in the 10-year constant-maturity yield, last 104 weeks. Rate-neutral part: weekly ratio change minus slope × yield change, compounded; it uses the latest two-year slope throughout, so it is an approximation.
- SPY drawdown = close / highest prior close − 1, on a separate chart (no dual axis).
- ETF prices only; the reader-safe single-name universe does not enter this exhibit.
Sources
- MCH research warehouse, daily dividend-adjusted ETF closes (Alpha Vantage); through 30 Sep 2026.
- MCH research warehouse, US macro series (Alpha Vantage economic indicators).
Universe
| Names in the published feed | 886 |
| Excluded: held, suspended, withdrawn, deferred, deal-pending or pending review | 54 |
| Reader-safe universe | 832 |
| Used in this exhibit | 0 |
ETF exhibit: no single-name data is used, so the reader-safe universe does not enter it.
General and impersonal investment research. Not personal financial advice. Forecasts, valuations and model outputs are estimates and may be wrong. See Investment Disclaimer.
MCH Analysis is a general investment-research publication of MCH Advisory (Pty) Ltd. It is not personal financial advice and does not take your circumstances into account. MCH is not a licensed financial services provider or a registered investment adviser. Past performance, whether actual or simulated, does not predict future results. Subscriber Agreement | Privacy and Cookie Notice | Research Governance Policies