When considering where the global credit cycle is at, it’s often easy to form a view based on a handful of recent articles, statistics and anecdotes. The most memorable of these tend to be either very positive or negative otherwise they wouldn’t be published or would be quickly forgotten. A... Show More
The US high yield market has grown larger and riskier since the financial crisis. Issuers of debt have the whip hand as buyers compete to gain an allocation in the face of surging demand from CLOs and retail funds. Companies are emboldened to seek ever weaker covenants and are taking... Show More
A recent working paper from the IMF titled “Credit Booms – Is China Different?” provides a good summary of many of the key issues facing China’s economy. Rapid credit growth since the global financial crisis is record setting for both its total expansion and its duration. Credit is being poorly... Show More
One of the classic signs that the credit cycle is nearing the end is that borrowers that shouldn’t be getting financed not only get funded, but get it at terms that seem crazy. I’ve recently written about the silly things happening in global high yield debt, Chinese debt and the... Show More
China’s debt bonfire has been building for decades, but recent news and data points to it growing faster than ever with a greater risk of becoming an economy scorching inferno. There’s three key components to this analogy, the wood, the accelerant and the matches. Show More
Good Afternoon, Show More
From Bloomberg: Total debt of publicly traded non-financial companies in China and Hong Kong has surged to $1.98 trillion from $607 billion at the end of 2007. Some 63 companies have a debt-to-equity ratios exceeding 400%, compared to the average of 73%. In latest filings, 351 have negative ratios of... Show More
China's ratings agency Dangong has downgraded the US from A to A- and maintained a negative outlook. The government is still approaching the verge of a default crisis, a situation that can not be alleviated in the foreseeable future. Dangong said in their release Show More
Felix Salmon (Reuters): The default has already begun, The best way to look at this, I think, is that there's a spectrum of default severities. At one end, you have the outright repudiation of sovereign debt, a la Ecuador in 2008; at the other, you have the sequester, which involves... Show More
So what would happen in the unlikely event the US defaults? 1. A series of legal triggers, potentially transmitting the default to many other markets. 2. The repo markets will seize up, causing the rapid closing of trades and then fire sales of securities and further price declines. (keep in... Show More