“This Is A Bid-Wanted Situation”: Credit Hit By Liquidation Panic Amid Unprecedented Firesales

Friday, December 21, 2018
By Paul Martin

by Tyler Durden
Fri, 12/21/2018

With the panic selling in equities increasingly spreading to credit, yesterday saw at least one investor dump their holdings in not one but both of the biggest junk bond ETFs with little consideration for price in what amounted to a liquidation firesale.

As Bloomberg notes, at 11:21am ET on Thursday, a trader sold close to 4 million shares worth $322 million of the HYG High Yield Bond ETF.

About five minutes later, 8 million shares worth $267 million of the JNK High Yield Junk Bond ETF were also sold. Then, another $350 million worth of HYG was unloaded at 1:39 p.m.

Commenting on the liquidations, Josh Lukeman, head of ETF market making at Credit Suisse noted – with a fair dose of snark – that after a relentless rally into high yield as recently as the end of September, junk bonds are no longer “a popular place to park cash.” In fact, investors can’t wait to get out as BWIC suddenly emerge:

“This is a bid-wanted situation in high-yield credit ETFs,” he told Bloomberg: “HYG options are also very active, currently trading 400 percent above their average daily volume, with a 15-to-one put-to-call ratio.” The fund, which has declined for fix straight days, was down another 0.2% on Friday, to its lowest level since February 2016; as part of the selloff, HYG shares hit their steeped discount to the fund’s NAV since early 2018, suggesting that the underlying bonds have even more to drop.

The Rest…HERE

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