- the source for market opinions


September 18, 2016 | Credit Spreads Widen

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Variant Perception reports US Corporate Debt Near Records, Credit Spreads to Widen. Lets take a look

The present calm in high-yield markets is entirely unwarranted and at odds with where we are in the US credit cycle. Corporate debt to GDP in the US is at all-time highs. In the past, whenever corporate debt reached around 42-45% of GDP, the US approached a recession. Today rates are lower, but corporate debt is already above 45% of GDP. Some investors prefer to look at net debt minus liquid assets, but even there, the measure is higher than in 2001 and 2008 (also the top 50 companies hold two thirds of all cash, so aggregate figures are highly misleading).

Every single leading indicator we have points to wider credit spreads. It doesn’t matter if you look at accounting relationships (cash flow to debt, capex to EBIT) or economic relationships (corporate debt-to-GDP, lending growth YoY), or market relationships (yield curves flattening). The message is wider spreads are inevitable.

US Corporate Debt


Credit Spreads Expected to Widen


Related Articles

Mike “Mish” Shedlock

STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the Weekly Recap.

September 18th, 2016

Posted In: Mish Talk

Post a Comment:

Your email address will not be published. Required fields are marked *

All Comments are moderated before appearing on the site


This site uses Akismet to reduce spam. Learn how your comment data is processed.