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On Monday, bond investors may have said we-told-you-so
, but they also tacitly gave investors reason not to worry too much.
The WSJ noted
that corporate-bond markets had been showing signs of weakness ahead of the plunge in major stock indexes in recent days—similar to the warnings signs the credit markets flashed ahead of the stock market drops of 2000 and 2008.
But the response in credit markets, particularly in the junk-bond markets, on Monday diverged wildly from the response among credit investors in 2008. Junk-bond investors were largely calm Monday, and trading volume was relatively low, according to several traders.
On Monday, junk-bond prices dipped to 94.4 cents from 95.3 cents Friday, a drop of less than 1%, according to Barclays data. Yet the Dow closed down 3.6%, at 15871.35, and the S&P 500 dropped 77.68 points, or 3.9%, to 1893.21. The closing prices of the stock markets, while down sharply, masked the extreme intraday swings in the indexes.
That contrasted with the relatively quiet day of trading in the bond markets Monday.