Category Archives: debt markets

19/12/18: Debt-Debt-Baby: BBB-rated & lower ‘bump’


Gradual deterioration in the quality of corporate debt traded in the markets has been quite spectacular over 2018:

The above chart shows that at the end of 3Q 2018, the market share of BBB and lower-rated corporate  credit is now in excess of 50%, in excess of USD4.4 trillion, matching prior historical record set at 4Q 2017-1Q 2018. BIS' Claudio Borio was quick out on the rising risks: https://www.bis.org/publ/qtrpdf/r_qt1812_ontherecord.htm, saying "...the bulge of BBB corporate debt, just above junk status, hovers like a dark cloud over investors. Should this debt be downgraded if and when the economy weakened, it is bound to put substantial pressure on a market that is already quite illiquid and, in the process, to generate broader waves. ... What does this all mean for the prospects ahead? It means that the market tensions we saw during this quarter were not an isolated event. ... Faced with unprecedented initial conditions - extraordinarily low interest rates, bloated central bank balance sheets and high global indebtedness, both private and public - monetary policy normalisation was bound to be challenging especially in light of trade tensions and political uncertainty. The recent bump is likely to be just one in a series."

You can read my views on the latter aspect of the markets dynamics in the post that will follow.

19/12/18: Debt-Debt-Baby: BBB-rated & lower ‘bump’


Gradual deterioration in the quality of corporate debt traded in the markets has been quite spectacular over 2018:

The above chart shows that at the end of 3Q 2018, the market share of BBB and lower-rated corporate  credit is now in excess of 50%, in excess of USD4.4 trillion, matching prior historical record set at 4Q 2017-1Q 2018. BIS' Claudio Borio was quick out on the rising risks: https://www.bis.org/publ/qtrpdf/r_qt1812_ontherecord.htm, saying "...the bulge of BBB corporate debt, just above junk status, hovers like a dark cloud over investors. Should this debt be downgraded if and when the economy weakened, it is bound to put substantial pressure on a market that is already quite illiquid and, in the process, to generate broader waves. ... What does this all mean for the prospects ahead? It means that the market tensions we saw during this quarter were not an isolated event. ... Faced with unprecedented initial conditions - extraordinarily low interest rates, bloated central bank balance sheets and high global indebtedness, both private and public - monetary policy normalisation was bound to be challenging especially in light of trade tensions and political uncertainty. The recent bump is likely to be just one in a series."

You can read my views on the latter aspect of the markets dynamics in the post that will follow.

27/3/15: Debt, Glorious Debt, Deluge of Debt… and Negative Yields


In the article on global debt woes forthcoming in one of the financial letters I contribute to in April, I will be looking more in depth at the problems brewing in the global asset markets. But for now, couple of interesting (additional) points.

According to Pictet, the share of global debt that is trading at negative yields has now risen to 8% of the total debt outstanding. For the Euro markets, 19% of all debt traded is now negative yielding, for debt denominated in Swedish SEK - 33% and for for Swiss CHF denominated debt - 44%.

If this is not enough to raise your hair, here is what investors think of the bonds markets:
Source: @lebullmarche
Per above, two core concerns are now taking over the worry-ranks for institutional investors: valuations bubble in bonds markets (up from 17% to 30% between January and March 2015) and Supply and quality of issuance of new debt (up from 6% in January to 26% in March).