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Old 10-01-2019, 12:15 PM
 
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ZIRP ended in 2016. Fed rate is currently 1.83%. The next crisis won't be a bank crisis, it will be a corporate debt default crisis. Corporate debt is at an all-time high at 45% of GDP.
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Old 10-01-2019, 01:02 PM
 
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Originally Posted by Elliott_CA View Post
ZIRP ended in 2016. Fed rate is currently 1.83%. The next crisis won't be a bank crisis, it will be a corporate debt default crisis. Corporate debt is at an all-time high at 45% of GDP.
The biggest problem is more than half of all corporate debt is rated BBB ...that is the last grade considered investment grade .... any downgrade then makes your debt not able to be held by many pension funds , insurance , companies and mutual funds ....that will kill these companies as borrowing costs sky rocket and existing bonds plummet....
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Old 10-01-2019, 01:43 PM
 
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High yield corporate debt is scary right now. With yields dropping it has pushed many investors out on the risk curve to chase yield. There is a lot of money bidding up bond prices on that end of the market and it has pushed yields down. The stampede out of high yield is going to be epic if things continue to waver. The warning sirens have been blaring.
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Old 10-01-2019, 01:46 PM
 
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Originally Posted by aridon View Post
High yield corporate debt is scary right now. With yields dropping it has pushed many investors out on the risk curve to chase yield. There is a lot of money bidding up bond prices on that end of the market and it has pushed yields down. The stampede out of high yield is going to be epic if things continue to waver. The warning sirens have been blaring.
The sweet spot has been the BBB ..which is still investment grade ....it pays quite a bit more than the higher ratings ...but that is 53% of all corporate bonds .... one slip and that falls from investment grade with severe repercussions...
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Old 10-01-2019, 04:30 PM
 
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Yeah the amount of BBB credit is simply crazy.


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Old 10-01-2019, 04:34 PM
 
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It is the sweet spot between yield and risk....
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Old 10-01-2019, 05:55 PM
 
Location: NC
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Originally Posted by luv4horses View Post
Itís a fact. National debt went to zero with a slight surplus by the end of the Bill Clinton presidency.
Sorry. I must have been inattentive.
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Old 10-01-2019, 08:04 PM
 
144 posts, read 101,352 times
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Originally Posted by aridon View Post
High yield corporate debt is scary right now. With yields dropping it has pushed many investors out on the risk curve to chase yield. There is a lot of money bidding up bond prices on that end of the market and it has pushed yields down. The stampede out of high yield is going to be epic if things continue to waver. The warning sirens have been blaring.
I think that the better quality High Yield bond funds such as Vanguard High Yield are pretty safe right now. People with extra money are buying bonds because they think that stocks are getting pricey and there are no other reasonable alternatives with banks and short term Treasuries paying hardly anything. So, when you have more buyers than sellers in the bond market, the price of the bonds goes up and the return (for new purchases) goes down. People who bought in a year or so ago when the bond prices were lower and the rates higher will still receive the rate that was in effect at the time of their purchase on their investment amount.

Also, the fact that interest rates are now dropping is good news for financially strapped companies because they can refinance their debt at lower rates which will give them some breathing room.

All of this is just my opinion. I'm sure that a good case could be made for an opposite point of view.
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Old 10-01-2019, 08:16 PM
 
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Originally Posted by Chas863 View Post
I think that the better quality High Yield bond funds such as Vanguard High Yield are pretty safe right now. People with extra money are buying bonds because they think that stocks are getting pricey and there are no other reasonable alternatives with banks and short term Treasuries paying hardly anything. So, when you have more buyers than sellers in the bond market, the price of the bonds goes up and the return (for new purchases) goes down. People who bought in a year or so ago when the bond prices were lower and the rates higher will still receive the rate that was in effect at the time of their purchase on their investment amount.

Also, the fact that interest rates are now dropping is good news for financially strapped companies because they can refinance their debt at lower rates which will give them some breathing room.

All of this is just my opinion. I'm sure that a good case could be made for an opposite point of view.
Rates have bottomed three times since 2010. The bump from low rates and refinancing is negligible to nothing at this point. The problem isn't credit, it's demand. Although that will spread to credit if things don't pick up very quickly globally.
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Old 10-01-2019, 08:35 PM
 
1,247 posts, read 440,201 times
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Originally Posted by luv4horses View Post
Itís a fact. National debt went to zero with a slight surplus by the end of the Bill Clinton presidency.
You are quite mistaken. The national debt was $5.65 trillion at the end of Bill's presidency. (https://www.thestreet.com/politics/n...-year-14876008)
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