on November 18, 2014
One of the surest signs that a bubble is about to burst is junk bonds behaving like respectable paper. … This pretty much sums up today’s fixed income world. …
Most of the following charts are from a long, very well-done cautionary article by Nottingham Advisors’ Lawrence Whistler:
The supply of junk bonds is way higher than before the previous two market crashes:
The issuance of covenant-light loans — the crappiest kind of junk — is rising. …
Here’s what happened to the various classes of debt the last time things got this out of whack (junk is purple):
As for what might cause the junk market to crack, one prime candidate is the (shale) oil industry.
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