junk bonds

Insider

Off The Cuff: The Bond Market Will Have A Rude Awakening Soon

Higher interest rates will unleash a world of trouble
Thursday, February 22, 2018, 7:54 PM

In this week's Off The Cuff podcast, Chris and Wolf Richter discuss:

  • The Coming Rude Awakening For Bonds
    • Spiking yields are about to crash prices
  • Multi-TrillIon Dollar Deficits
    • The US is spending much more than it admits to
  • Kryptonite For The Housing Market
    • Higher interest rates & unfavorable tax code changes
  • Pension Woes
    • Most pension plans will soon be in a world of pain

Chris and Wolf marvel at the bond market's apparent indifference so far to rising rates. Rising rates, of course, mathematically mean bond prices should lower -- but that hasn't happened much yet. With the 10-year Treasury nearly at 3% now, that resistance can't last for long. Especially if the Fed proceeds with its declared program of quantitative tightening this year.

Wolf explains the ticking time bond in the bond market thusly...

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Death Cross on the Russell 2000

Another likely harbinger of a coming market correction
Monday, September 22, 2014, 6:51 PM

One of the 'targets' I've had my eye on in the market has been the Russell 2000, a small cap stock index comprised of the smallest 2000 companies in the Russell 3000 index.

The reason I've been tracking this index carefully, along with junk bonds, is that the small companies usually give you an advance heads-up on trouble soon headed for the larger cap companies and stock indexes.

 
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Something Very Wicked This Way Comes

Namely: certain & severe crisis when the bond bubble bursts
Wednesday, August 27, 2014, 7:17 PM

Executive Summary

  • How sovereign debt is becoming larger and more mis-priced each year
  • Why corporate borrowing is accelerating, but only being used for non-productive means
  • Junk bonds have never been priced so low (ever), indicating a complete denial of risk
  • Today's record bond prices are supported by near-historic low (i.e. extremely tenuous) levels of volume
  • Why, mathematically, nearly no-one will be able to exit unscathed when this overinflated market rolls over

If you have not yet read Is Part 1: I Blame The Central Banks available free to all readers, please click here to read it first.

Italy: Insanity On Display

Let’s look at one of the sovereign entities that has piled on the debt to staggering levels. In this case: Italy.

This can serve as a template for understanding the rest of the insanity that exists in the global sovereign bond market.

The rules for lending to a nation should be roughly the same as lending to an individual. You’ve got some measure of the country's credit-worthiness that needs to be taken into account, plus an assessment of its income.

After all, the future principal and interest payments have to come from future income. If there’s too much debt compared to income, then there’s an increasing risk that the debt servicing payments not only will not be made, but cannot be made.

Italy’s sovereign debt has been expanding enormously as the government borrows and spends. Its national debt finally cleared more than $2 trillion euros early in 2014:

Italy's public debt hits record 2.1072 trillion euros

Apr 14, 2014

(ANSAmed) - ROME, APRIL 14 - Italy's massive public debt hit a record 2.1072 trillion euros in February, the central bank reported Monday. The amount was up 17.5 billion euros since January, the Bank of Italy said.

The European Commission has criticized Italy's 2014 budget for not doing enough to bring down debt, around 132% of gross domestic product (GDP).

As a result it has put Italy under "specific monitoring" over its "excessive macroeconomic imbalances", which include high debt and poor competitiveness, as part of an in-depth review.

(Source)

Italy raked up significant debt at a far faster rate than its underlying economy was growing, leading to a steadily rising debt-to-GDP ratio as seen in this next chart... » Read more

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Is This Decline The Real Deal?

Or just another head-fake bear trap?
Wednesday, August 6, 2014, 9:36 AM

Is this stock market decline the "real deal"? (that is, the start of a serious correction of 10% or more) Or is it just another garden-variety dip in the long-running Bull market? Let’s start by looking for extremes that tend to mark the tops in Bull markets. » Read more

Blog

Four Signs That We're Back in Dangerous Bubble Territory

Stocks, bonds – everything – at risk
Tuesday, May 21, 2013, 6:09 PM

As the global equity and bond markets grind ever higher, abundant signs exist that we are once again living through an asset bubble or rather a whole series of bubbles in a variety of markets. This makes this period quite interesting, but also quite dangerous.

With equity and bond markets at or near all-time record highs, with all financial assets consistently shrugging off bad or worse news as the riskiest of assets continue to find consistent upward bids, we find ourselves in familiar and bubbly territory. » Read more

Blog

Investors Beware: Market Risks Today Are Higher than Ever

It's time to start worrying about the bond market
Thursday, March 21, 2013, 3:42 PM

After the shot across the bow in 2008, you might have expected regulators and market participants would use the experience to change for the better, to become more prudent, and to reduce the sorts of risky behaviors that almost crashed the entire system.

Unfortunately, you'd be wrong. » Read more

Daily Digest

Image by j.o.h.n. walker, Flickr Creative Commons

Daily Digest 3/6 - Wall St Selling Junk Bonds At Record Pace, College Could Cost $300k In 10 Years

Wednesday, March 6, 2013, 10:47 AM
  • The Greek Catastrophe: Three Generations of Greek Workers
  • Public authorities rack up nearly $250 billion in debt
  • European Shares at Multi-Year Highs on Stimulus Hopes
  • Analysis - Older French face slow squeeze in pension reform
  • U.S. Tells G-7 to Avoid Currency Intervention Except Rare Cases
  • China's Ghost Towns: Deserted Cities Raise Fears of Debt Crisis
  • Food banks are thriving, much to the government's embarrassment
  • Egypt’s fuel shortages demonstrate perfect storm of economic pressures
  • Revealed: The shocking true scale of food poverty 
  • Report: Record 50,000 homeless now in NYC
  • Images of Japan's barren tsunami coast 2 years on
  • College could cost over $300k in 10 years
  • Wall Street selling junk bonds at record pace
  • Why America's middle class is losing ground
  • Gross Says Yen to Weaken to 100 Per Dollar on QE Concern