Credit traders are sending you some big warning signals

Credit traders have an uncanny knack for sounding alarm bells well before stocks realize there’s a problem. This time may be no different. Investors yanked $1.1 billion from U.S. investment-grade bond funds last week, the biggest withdrawal since 2013, according to data compiled by Wells Fargo. Dollar-denominated company bonds of all ratings have lost 2.3% since the end of January, even as the S&P500 index gained 5.7%. “Credit is the warning signal that everyone’s been looking for,” said Jim Bianco, founder of Bianco Research LLC in Chicago. “That is something that’s been a very good leading indicator for the past 15 years.” “Unlike the credit market, the equity market well into 2008 was very complacent about the subprime crisis that led to a full blown financial crisis. While we are not predicting another financial crisis, we believe it is important to keep highlighting to investors across asset classes that conditions in the high grade credit market are currently very unusual.” (VIEW LINK)