Distressed. Officially.

Distressed. Officially.

For the first time since the GFC, junk bonds (as a group) are officially "distressed". To be sure, credit markets have been "distressed" in a kind of general, anecdotal sense for weeks, but now we've breached the technical threshold beyond which we can all declare a high yield state of emergency. On Friday, junk spreads breached 1,000bps, a level last seen in June of 2009. It was the culmination of a harrowing week that found Goldman warning of a 24% contraction in the US economy in Q2 and
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5 thoughts on “Distressed. Officially.

    1. Several companies in the S&P currently show negative net worth on their B/S because they have bought back so much stock at inflated prices it wipes out their equity. KMB is one of these, for example, multiple years with no net worth yet it carries A/A-1 debt ratings. A bunch of these now reside in our key indexes. What will the coming stress do to them? We’ve already seen what three months has done to Boeing and the airlines (“Bail me, I spent all my money to make my bosses rich now I have no lunch money.”)

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