Mining GFC continues to cool on credit feast

The US dollar rebounded Friday night:

Commodity currencies fell anyway:

Brent popped and dropped in what the bold might wonder is a top given the US rig count rose:

Base metals were mixed but copper still has a very bullish chart:

Big miners were mixed:

US and EM high yield was gobbled up again:

And that where we find BofAML:

US HY recorded another impressive +$2.01bn (+1.0%) net inflow last week, their 5th consecutive time in the green. Over the last 4 weeks, US HY has gained a net $11.52bn from retail flows, the largest ever in a 4 week span for the asset class. Given the 40% increase in WTI prices since February 11th, improving economic data, and dovish support from the ECB, it is not surprising to us that retail has piled into risk assets and by extension US HY lately.

However, given that the fundamental backdrop has not changed and defaults are in fact increasing, we believe these inflows are an over-reaction to transitory tailwinds. In fact, we think the recent rally has limited staying power as yesterday’s acknowledgement by Chair Yellen of stresses in financial markets, combined with a weaker consumer and poor Q4 earnings season should have created renewed fears of a growth slowdown in the US, in our view.

That’s not the problem for me. If these flows can push credit spreads a little tighter then US shale is going to flood back into the market again and it’s game over for another round of “find the marginal producer”. Do the retail buyers of this debt understand this? Maybe, but given not even commodity producers like Australia have figured it out I am skeptical.