High-yield debt refers to high-yield bonds or what is often called junk bonds. A high-yield bond is a high paying bond with a lower credit rating than investment-grade corporate bonds, Treasury bonds, and municipal bonds. Because of the increased risk of default, these bonds pay a higher yield than investment grade bonds.

At GuerillaStockTrading.com, we track high-yield debt (HYG) as an early swing trading indicator for stocks.


When HYG suddenly falls, the S&P 500 falls within 3 to 5 trading days about 70% of the time. When HYG spikes higher, the S&P 500 spikes higher within 3 to 5 trading days.

The reason the S&P 500 usually follows HYG is that HYG is an early read on a risk-on versus risk-off market. In a risk-off market, riskier high-yielding bonds often sell off before the stock market.

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