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IPFS News Link • Economy - International

"Unprecedented" Global Policy Easing Has Failed To Curtail Credit Carnage

• https://www.zerohedge.com, by Tyler Durden

That is how Monica Erickson, a portfolio manager at DoubleLine, describes the carnage across every aspect of the credit markets that has erupted in just the space of the last few weeks.

For higher-risk 'junk' rated companies, the sell-off has been the most severe, with US high yield corporate bond risk topping 1000bps for the first time since 2009:

In fact, all of the credit markets - from investment-grade corporates to off-the-run Treasuries and from leveraged loans to short-dated muni bonds - are all frozen...

As NBF warns "should leveraged loans go bad, that has potential to freeze the corporate bond market and the entire financial system." Well, they are going bad...

Commercial mortgage-backed securities are a bloodbath...

And despite The Fed's muni-focused bailout, yields continue to soar...

Worse still, the systemic risk of the financial system appears to be creaking gravely with LIBOR-OIS spreads - generally considered to be a measure of health of the banking system - blowing out to 2009 highs, as DoubleLine's Erickson notes, "companies are focused on increasing liquidity, drawing down revolvers and accessing cash wherever possible. They are preparing for the worst because we are in an unprecedented environment," putting massive pressure on bank balance sheets (and implicitly their liquidity needs).


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