Cash bonds appear to be outperforming (not widening as much) but this is due to managers, such as Aberdeen's Luke Hickmane, preferring to use the considerably more liquid ETF and CDS markets to hedge before unwinding underlying cash positions.

Additionally, we note that Hickman is shunning exchange-traded bond funds, fearing a "blowout" in the passive space within the next two years.

"If you've been in the market long enough to remember past blowouts, you know that liquidity is key," Hickmore said...

"High-yield credit and emerging-market ETFs won't be well placed to handle a liquidity crunch."

And, as that fear of a liquidity crunch leaks from cash markets to the ETF, it is the CDS markets that have become a more popular hedging tool for professionals in recent weeks.

Hickman is not alone in his fear of a "blowout" as DoubleLine CEO Jeffrey Gundlach explained in a recent interview - the time to get out of corporate bonds is now... (via CityWire).