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February 2024
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America in releveraging?

America’s financial sector is still undergoing the deleveraging process – Big banks are busy in repairing their balance sheets, gradually writing off their losses in housing bubble era.

But with Fed’s super easy monetary policy and easy access to the dirt cheap credit, there seems to be a divergence in terms of attitude toward credit. The main street corporate America now is the one who carries the credit torch forward. With interest rate expected only to rise (not fall), America’s corporations are borrowing like there is no tomorrow. This is being reflected in the junk bond market, where yields again fell close to the 2007-level low.

Is another credit bubble in the making? Are we going to see a flurry of corporate defaults in coming years?  Is  the Fed just delaying the inevitable?

This FT video may offer you some insights to the issue.

(click to play the video)