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Yuriy Matso highlights that the credit risk premium, measured as the Baa–10Y 3-year average, currently stands at 1.65%.
This level is below the 2007 low of 1.75% and is now just 0.1 percentage points above the 2000 extreme of 1.56%, indicating that the market is pricing in almost no credit risk.
Matso recently observed a renewed divergence between the S&P 500 index and the percentage of its stocks trading above the 200-day moving average, according to his report. He also reported a sharp drop in the VIX term structure on Friday, indicating market optimism in a separate update. These developments illustrate Matso’s ongoing focus on shifts in market breadth and sentiment.