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09-21

$iShares iBoxx $ Investment Grade Corporate Bond ETF(LQD)$ $Simplify High Yield ETF(CDX)$ 💰📉📊 Credit Market Flood: Cash Drowns IG Spreads 📊📉💰

Bond investors are practically drowning in liquidity. After more than $1T in investment-grade supply YTD, managers still have $74B more to reinvest than issuers are selling. The wall of cash is forcing spreads to compress: IG just touched 0.72%; the tightest since 1998.

📌 Flows and positioning

Investors are unloading credit protection at an accelerating pace. CDX IG net selling is now among the heaviest in three years (DTCC/Barclays). The signal is clear: risk appetite is alive, and funds are hunting yield without fearing defaults.

📌 ETF demand

Flows confirm the shift. Funds are piling into $LQD, with weekly candles showing a steady recovery off the $98.24 low. Technicals are constructive:

• RSI(6) = 74.75 (strong momentum)

• RSI(12/24) trending bullish above 60

• MACD positive crossover confirmed

• Price consolidating above key moving averages (MA5/10/20 all near $110–111)

📌 Fundamental backdrop

Even with YTD issuance over $1T, the demand overhang is forcing spreads lower. LQD’s 4.25% yield and monthly dividends make it a natural magnet for managers who can’t stay in cash. With $30.9B AUM, volumes remain deep (26.85M shares traded), and options activity (33.56K contracts) points to steady positioning, with calls outpacing puts.

📌 Context

The last time spreads were this tight, the Dot-com bubble was in full swing. Yet unlike 1998, today’s dynamic is defined by fiscal dominance and central bank liquidity anchoring. Technical support at $106.06 and resistance at $113.56 make the near-term range clear. A breakout could accelerate if spreads grind tighter.

👉❓Does this flood of reinvestment cash mean we’ve entered a new compression cycle, or is this a liquidity mirage before volatility returns?

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# 💰Stocks to watch today?(19 Dec)

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Comment（6）

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  • Tui Jude
    ·09-22
    TOP
    The flows into LQD and CDX IG are fascinating because they show managers can’t sit in cash even with over $1T in supply this year. The 4.25% yield plus monthly dividends is a magnet, and that demand backdrop makes the 106 to 113.56 range all the more critical.
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  • Hen Solo
    ·09-22
    TOP
    The fact that spreads are at their tightest since 1998 while volumes in LQD stay this deep really says a lot about liquidity conditions. RSI above 70 with MACD confirming the crossover makes this a technically convincing setup that pairs with the fundamental backdrop.
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  • Cool Cat Winston
    ·09-22
    TOP
    📊I’m struck by how tight IG spreads have become at 0.72%, it really highlights how excess cash is reshaping risk appetite. LQD’s steady climb off 98.24 fits perfectly with this shift, it reminds me of the compression cycle we saw when credit was last this flush with demand.
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  • Queengirlypops
    ·09-22
    Spreads this tight and funds loading up LQD has me hyped because it’s proof the market’s got way more juice than people admit. That 98.24 bounce and now RSI cooking above 70 just shows buyers aren’t slowing down, feels like the bond side’s running with pure conviction
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  • Kiwi Tigress
    ·09-22
    This setup is actually wild, spreads at 0.72% and LQD pushing up with that kind of momentum feels like credit is flexing harder than equities right now. The 4.25% yield getting scooped while everyone’s drowning in cash is exactly the kind of cycle reset I wanted to see play out.
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  • Merle Ted
    ·09-22
    all in, 125 by december.

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