Wednesday, December 02, 2015

2008-2009 Redux

Junk bonds were one of the major causes of the Great Recession. Pam Martens points out that things in the junk bond market are moving towards another Great Recession. The market is now approximately $1.8 trillion, about double the amount of junk bonds outstanding at the height of the financial crisis in 2008. Yields have skyrocketed. Downgrades to ratings are swamping the number of upgrades. According to the ratings agency, Moody’s, the ratio of upgrades to downgrades is at the worst level since the financial crash in 2008-2009. Junk bond investors have a negative return of 2.2 % – also the worst since the 2008 crisis. According to Standard and Poor’s, on a global basis, companies have defaulted on $95 billion worth of debt this year, making it the largest year of defaults since the height of the credit crisis in 2009.

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