Bond Resilience for Week of 7/18/2016

The US 10y Treasury bond yield is currently vulnerable to declines (rating of "0" on a Resilience scale of  0 to 3) and I expect yields to remain vulnerable to declines for the next few weeks.  Prices for US 10y Treasury Bonds will therefore tend to move higher.

Credit spreads (as measured by the US Corporate BBB - 10-Yr Treasury Spread) currently have low resilience (MRI rating of "1").  Based on current market dynamics, I expect the resilience rating to decline to a "0" over the next few weeks.  This means that credit spreads will tend to narrow.

Consistent with these two views, US high yield bonds are currently rated as moderately resilient (rating of "2"), and may soon be increased to a rating of "3." This is the highest resilience rating and suggests that high yield bond prices will be able to tolerate negative economic news and events relatively well.  High yield bond prices will tend to rise, all else equal.

Bottom line:  US bonds in general and US high yield bonds in particular will continue to be attractive investments for the next few weeks.