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The Trade: What junk bond rally means for stocks

Trader on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Trader on the floor of the New York Stock Exchange.

After all the hand-wringing about high-yield corporate debt defaults in the energy sector, prices for junk bonds are spiking and are now flat as a group for 2016. So if investors are bidding up the riskiest assets in the bond market, how do stocks and other securities react?

The iShares iBoxx USD High Yield Corporate Bond ETF (HYG) is up around 7 percent from the Feb. 11 low, rising with the market. HYG is an ETF that tracks the performance of an index of U.S. dollar-denominated, high-yield corporate bonds.

Using Kensho, a quantitative tool used by hedge funds, CNBC Pro found that when HYG rallies by at least 7 percent in one month, it usually keeps gaining.