Another Data Point To Ignore - There Are The Most Distressed Bonds In 6 Years
In the immortal words of Taylor Swift, "shake it off." That appears to be the meme of the new normal.Terrorist attacks - buy em; looming World War 3 - buy it; plunging earnings - perfect!; collapsing capex - bullish; soaring inventories - back up the truck; crashing homeownership - awesome sauce! interest rate are going to rise - brilliant!
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And while the ongoing carnage in the credit market is being ignored for now ("well, that's just energy, right?" nope!)...
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The fact of the matter is, as one manager pointed out that there are the most distressed bonds trading in six years - warning, "it's not just energy, it's everywhere."
Ignore that!
Charts: Bloomberg
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It is not just interest rates are rising, the market is increasingly factoring in real risk including default to rates which further depresses low yielding bonds and increases the rates for new bonds. Yellen's low rate game is finally failing miserably. Lending must always include risk premiums no matter how low rates go. With people and company piling on new debt because of low rates it seems clear when rates rise some will be left out hanging along with the lenders.