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Member since: Tue May 13, 2014, 06:50 PM
Number of posts: 6,392

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DOW 25928

Previous close 25717. 52 wk high 26951. 52 wk low 21912. Today's low 25771. High 25949.

Last Friday close 25502.

NASDAQ : 7729 ▲

S&P : 2834 ▲

Soybeans : 8.84 ▼

Looks like spring has sprung here in Virginia. Enjoy the weekend everyone.

DOW 25717

Previous close 25625. 52 wk high 26951. 52 wk low 21912. Today's low 25576. High 25743.

NASDAQ : 7669 ▲

S&P : 2815 ▲

Soybeans : 8.89 ▲


Corporate Bond Marketsin a Time of Unconventional Monetary Policy

The United States remains the largest market for corporate bonds. But non-financial companies from most other economies, including Japan, the United Kingdom, France and Korea, have all increased their use of corporate bonds as a means of borrowing. On a global scale, the most significant shift has been the rapid growth of the Chinese corporate bond market. The People’s Republic of China (China) has moved from a negligible level of issuance prior to the 2008 crisis to a record issuance amount of USD 590 billion in 2016, ranking second highest in the world.

The increased use of corporate bonds has been supported by regulatory initiatives in many economies aiming at stimulating the use of corporate bonds as a viable source of long term funding for non-financial companies and an attractive asset class for investors. The increase in bond usage is also consistent with the objectives of expansionary monetary policy and the related unconventional measures by major central banks in the form of quantitative easing.Given the elevated risks and vulnerabilities associated with the current outstanding stock of corporate bonds that is documented in this paper, it is therefore important to understand how and to what extent today’s corporate bond markets may be influenced by different economic and public policy scenarios.

First, there are concerns about global economic growth. And in the case of a downturn, highly leveraged companies would face difficulties in servicing their debt, which in turn, through lower investment and higher default rates may amplify the effects of a downturn. Second, while major central banks recently have modified the use of extraordinary measures, the future direction of monetary policy will continue to affect the dynamics on corporate bond markets. Last but not least, gross borrowings by governments from the bond markets are set to reach a new record level in 2019 as shown in the OECD Sovereign Borrowing Outlook 2019

Any developments in these areas will come at a time when non-financial companies in the next three years will have to pay back or refinance about USD 4 trillion worth of corporate bonds. This is close to the total balance sheet of the US Federal Reserve. Moreover, global net issuance of corporate bonds in 2018 decreased by 41% compared to 2017, reaching its lowest volume since 2008. Importantly, net issuance of non-investment grade bonds turned negative in 2018 indicating a reduced risk appetite among investors. The only other year that this happened over the last two decades was in 2008

The Next Financial Asset Crisis

"The “amount” of corporate bond investments that may be expected to default in the case of an economic downturn may be considerably larger than that experienced in the financial crisis. This divergence may arise not just because of a prolonged period of low issuer quality… but also because of the increase in the total amount of outstanding corporate bonds from USD 6.53 trillion in 2008 to USD 12.95 trillion in 2018. Due to the lower levels of covenant protection, non-investment grade issuers may indeed escape default for a longer time as it is now less likely that they breach a covenant. Nevertheless, bond investors’ portfolios may be hurt far before the occurrence of a default event, as the expectation of a company’s default and achievable recovery rates will quickly be factored in the bond price."

The authors also note that a financial shock similar to the 2008 crisis could result in $500 billion worth of BBB-rated corporate bonds being downgraded to non-investment grade within a year, forcing sales by non-investment grade investors. This figure could become even worse if a major issuer in the BBB category saw its credit rating drop, similar to what happened in 2005 to both General Motors and Ford Motor Company.

Corporate bond buyers - caveat emptor. You have been warned.

Please see companion OP for additional information.

DOW 25625

Previous close 25657. 52 wk high 26951. 52 wk low 21912. Today's low 25425. High 25758.

NASDAQ : 7643 ▼

S&P : 2805 ▼

Soybeans : 8.87 ▼

DOW 25657

Previous close 25516. 52 wk high 26951. 52 wk low 21912. Today's low 25544. High 25796.

NASDAQ : 7691 ▲

S&P : 2818 ▲

Soybeans : 9.01 ▼

DOW 25516

Previous close 25502. 52 wk high 26951. 52 wk low 21912. Today's low 25372. High 25603.

NASDAQ : 7637 ▼

S&P : 2798 ▼

Soybeans : 9.07 ▲

DI is running sloooww. Nancy must be back. Or saw they weather report for the mid west...

DOW 25502 for Friday 3/22/19

Previous close 25962. 52 wk high 26951. 52 wk low 21912. Today's low 25501. High 25877.

Last Friday's close 25848.

NASDAQ : 7642 ▼

S&P : 2800 ▼

Soybeans : 9.04 ▼

Have a good weekend everyone.

DOW 25962

Previous close 25745. 52 wk high 26951. 52 wk low 21912. Today's low 25657. High 26009.

NASDAQ : 7838 ▲

S&P : 2854 ▲

Soybeans : 9.11 ▲

Strong gains for the day.

DOW 25745

Previous close 25890. 52 wk high 26951. 52 wk low 21912. Today's low 25670. High 25929

NASDAQ : 7728 ▲

S&P : 2824 ▼

Soybeans : 9.05 ▲

Price of oil is rising. WTI hit $60.

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