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Book It: Credit Spreads Signal Recession

Let's fill in all the missing pieces.
Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit Sitka Pacific's Investment Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific. I am also a contributing "professor" on Minyanville, a community site focused on economic and financial education.
Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit Sitka Pacific's Investment Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific. I am also a contributing "professor" on Minyanville, a community site focused on economic and financial education.

$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

This article was originally published on Mish Talk.

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