How crazy are the credit markets?

Submitted by gjohnsit on Fri, 09/02/2016 - 4:30pm

First consider this.

You’d have to go back to the months following the financial crisis to find so many companies facing potentially ruinous debt problems.
That’s according to the latest tally by S&P Global Ratings of “weakest link” issuers. S&P counted 251 with ratings at the low end of junk status and a negative outlook, the most since October 2009, when the total was 264. The issuers collectively have about $359 billion of debt outstanding, led by energy companies, according to S&P’s Sept. 1 report....
The U.S. speculative-grade corporate default rate grew to 4.8 percent in August after seven defaults, and is expected to reach 5.6 percent by June 2017, S&P said in a separate report.

S&P Junk Issuers_0.JPG

In a sane world your response would be....

So why did the markets do this instead?
GS - HY Returns_0.JPG

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Submitted by Shockwave on Fri, 09/02/2016 - 4:44pm

Some of the bond buyers come from Europe

Bond Investors Cash Out in Europe, Head to U.S.

The European Central Bank recently started buying corporate bonds to boost the eurozone economy. One of the big beneficiaries so far: U.S. credit markets.

Faced with dwindling returns in Europe, some investors are selling their corporate bonds to the ECB and heading across the Atlantic where yields are higher and they aren’t so vulnerable to changes in expectations around central bank buying habits.

Weird dynamics. Things are getting scary again.

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The political revolution continues

Submitted by sojourns on Fri, 09/02/2016 - 5:23pm