Tuesday, May 12, 2009

‘Animal spirits’ and risk premia update


“NegA” = –A, our “animal spirits’ metric.  The risk premium (RP) is the Moody’s Baa - Aaa  spread.  We continue to see an exploitable trade going long the high yield and short the investment grade.  As pointed out in yesterday’s update, we see a high probability of the economy stabilizing and growing (slowly) over the coming year, which should promote confidence and a lowering of risk premia.

This is research, not investment advice.  Trade at your own risk.

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