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Old 08-25-2018, 03:27 AM
Danny B Danny B is offline
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Join Date: Oct 2012
Location: L.A. Ca.
Posts: 4,326
Yield curve and refi of junk

8/24 Fed Chair Powell: further rate hikes best way to protect recovery – Reuters
And what a FINE recovery it is. Powell is pedal-to-the-metal on rate hikes. DAMN THE TORPEDOES, FULL SPEED AHEAD. Ah, those torpedoes,,,,
I found some comments that I can not corroborate.
"As pointed out yesterday by Simon Black via the Wall Street journal 60% of all Russell 2k corporations carry junk bonds status.
Another 37% carry a BBB bond rating."

"That's right people 97% of all Russell 2k corporations have the lowest investment grade rating or junk.
Combine the above with the fact that I think around 40% of R2K companies are not even cash flow positive."

Whatever the reason, nobody wants bonds.
Bond spread, "And the 2s10s spread is now in the teens for the first time since Aug 2007..." Why does that date ring a bell? Here is a chart of the spread between 10 year and 2 year.

8/24 Loan demand suddenly tumbles as companies revolt to rising rates – Talk Markets
So, they refuse to refi but, they need to roll over junk-rated debt.

Yield-curve inversion isn't an infallible predictor of a crash but, it has been pretty accurate.

8/24 New reality of China’s failing economy is coming soon – Jim Rickards
China Inc. is an export driven economy. The shrinkage of the middle class around the world is death to their models. As the global mean wage bites deeper, they will have to print more and more . This brings them more capital outflow AND, they have to print more.
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