Credit Spreads Signal Recession

$176bn worth of corporate bonds has fallen from 'A' to 'BBB' so far this quarter - the highest since late 2015.

The Tweet of the day goes to Bloomberg's Tracy Alloway.

In contrast to 2015, this is not just oil-related. Let's fill in all the missing pieces.

First Time Since Lehman

The Financial Times reports US Credit Markets Dry Up as Volatility Rattles Investors.

Not a single company has borrowed money through the $1.2tn US high-yield corporate bond market this month. If that drought persists, it would be the first month since November 2008 that not a single high-yield bond priced in the market, according to data providers Informa and Dealogic.

Junk Bond Spreads

Bianco Research

Bloomberg reports High-Grade Credit Weakens Most Since February on GE Angst.

Leveraged Loan Deals

Not Isolated

Recession Odds

Contrary Indicators "No Recession in Sight"

This one is either downright funny or ironically serious, depending on your point of view.

Top White House economic adviser Larry Kudlow says 'Recession is so far in the distance I can't see it'.

Piling On

Looming Maturity Wall

The preceding two charts are from the MarketWatch report U.S. Corporate Debt Party is Getting Out of Hand.

Not Just US

It's not just the US either: [Europe Is Ground Zero for Global Credit Fears](Europe Is Ground Zero for Global Credit Fears)

Capitulation Silliness

The above Bloomberg chart notes "capitulation". I disagree.

On a short-term basis the Bloomberg chart does indeed look like a serious selloff.

Long-term, we are not even close.

An asset-bubble, credit-bust recession is on the way.

Mike "Mish" Shedlock

Comments (8)
No. 1-5
Ted R
Ted R

It looks like 2007 all over again.

Carl_R
Carl_R

The chart of Non-financial corporate debt as a percentage of GDP is interesting, but I lack an important piece of knowledge necessary to interpret it. What percentage of GDP do non-financial corporations account for? Has that changed? I suspect it is growing, too. If it is growing at the same rate, the long term upward trend in this chart may not tell us anything, though the shorter term cycles still do.

LawrenceBird
LawrenceBird

Sigh.. stats without context. So what is the notional downgardes to outstanding debt? Quoting one without the other is meaningless.

Same goes for the corp debt as %gdp. Has the level of rates (absolute or risk adjusted) affected that? What about the choice between equity and debt funding and factors affecting that decision?

Sechel
Sechel

How did we go to economy the envy of the world according to Trump breaking every GDP record to recession in only a few months?

This is part tongue in cheek and part outrage

shamrock
shamrock

Kudlow sold his soul. An unabashed free-trader his entire adult life is now shilling for tariffs and trade wars.