The Defaulting Crisis Spreading
Is anyplace safe?????
First it was SubPrime Residential Mortgages, than it spread to Alt A, Jumbo and now Prime Mortgages are seeing rapidly growing default rates.
Not to be left out, the Municipal Auction Rate market collapsed and soon followed by rapid deterioration in the Commercial Mortgage Market.
Then the Junk Bond corporate market and now:
In recent days, price declines among investment-grade bonds have pushed their spreads -- the gap between their yields and those of ultrasafe Treasury securities -- to a multidecade high, according to Merrill Lynch data. These bonds now yield 3.11 percentage points more than Treasurys on average, exceeding their recent March peak at 3.05 points.
Financial institutions can't put off their fund raising forever. They have $660 billion of U.S. dollar-denominated long-term corporate bonds coming due in the next 12 months, the highest volume ever for such a period of time, according to J.P. Morgan Chase & Co. research.
"The market this August is as thin as we've ever seen it, and borrowers have had to pay very significant premiums to get investor focus," said Therese Esperdy, head of global debt capital markets at J.P. Morgan, adding that there's been a bit of a "downward spiral in valuations."
Multi Decade Highs for INVESTMENT GRADE corporate debt????
As the credit markets continue to deteriorate, the avenues for funding are going to get much more expensive.........with the trailing 12 month PE of the DOW already at nil.....what do you think it will be with much higher capital costs?