Page 20 - The GSE Report March-April 2018

MONETARY POLICY
MJARN.U-AARPYR.20210818
understanding dark money monitoring what central bankers do, not what they say, you can strategically work both of those outcomes to your advantage. (Agora Financial, Nomi Prins, 04/24/18)
Porter Stansberry wrote:
I really think China has absolutely nothing to do with the U.S. corporate bond market. I would point you in another direction, in fact. The Swiss central bank has accumulated, by my last count, $600 billion worth of corporate bonds in the last five years. So if you’re looking for why the corporate bond cycle has lasted so much longer than I expected, look no further than the Swiss central bank. But really that’s just one of major central banks that has been buying corporate bonds of all stripes.
It’s the central banks that have promoted this incredible run in credit, and
it has influenced corporate credit to the degree that, in Europe, junk bonds were trading with negative yields. So that is: Investors would buy a lousy company’s credit and then have to pay for the privilege of owning it. Just try to wrap your head around that. So things have gone beyond insane
in the world of corporate credit, particularly low-quality corporate credit. And sooner or later there will be hell to pay. I wish I could tell you exactly when. I do believe the Toys “R” Us bankruptcy is the first of many where there will be no recovery. And that will not be pleasant for investors or our financial markets. (What to Buy When Stock & Bond Markets Crash, Porter Stansberry, 03/29/17)
Will central banks’ tightening trigger a crisis in cov-light corporate debt?
Market analysts are becoming increasingly concerned over aggressive terms and the proliferation of weaker covenants in corporate debt, particularly in a rising rate environment.
In 2017, the issuance of U.S. leveraged loans rose nearly 50% to more than $1.3 trillion, well above the pre-crisis peak of $710 billion in 2007. While big banks reduced their market share of leveraged loans by 11% in terms of the number of loans (5.4% by volume), non-banks increased their market share by more than 50% by number and more than 100% by volume.
© 2018 by Canfield Press, LLC. All rights reserved. www.canfieldpress.com 20