In Credit, A Swan Song

In Credit, A Swan Song

"Way" back on March 6, I flagged "cracks" in the credit market amid worsening risk sentiment and an increasingly dour outlook for the global economy thanks to various travel restrictions and containment efforts associated with the fight against COVID-19. I hesitate to use the phrase "I flagged". That suggests I possessed some special foresight or was otherwise more prescient than the next guy. The reality is, anyone with common sense and a pulse has been concerned about credit for at least two
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4 thoughts on “In Credit, A Swan Song

  1. What we have here is a run on the bank- it is still going on. Yesterday afternoon it hit muncipal bonds. ETFs are not the culprit, but of course the structure is probably ill suited for corporate high yield and bank loans as you alude to in your article. Not so sure about investment grade bonds, although the concentration of vulnerable BBB in the space is concerning. Remember there is a liquidity mismatch for open end mutual funds as well as ETFs. The run just happens a little more slowly- but in a market like this you will get runs on open end mutual funds as well. The Fed has opened the spigots and fiscal stimulus is coming so I actually think stocks may be trying to find a bottom here. But there are still landmines out there- yesterday afternoon it was the municipal bond markets turn.

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