Last Two Times this Happened, it was Mayhem [View all]

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Last Two Times this Happened, it was Mayhem
by Wolf Richter • November 13, 2015


[font color="blue"]Moody’s Warns about Credit Crunch, Unnerves with Parallels to 2008![/font]

The US bond market has swollen to $40 trillion. Over $8 trillion are corporate bonds, up a mind-boggling 50% from when the Fed unleashed its zero-interest-rate policy and QE seven years ago.

So far this year, $1.34 trillion in new corporate bonds have been issued, up 6.8% from last year at this time, which had already been a record year, according to the Securities Industry and Financial Markets Association (SIFMA). Bond issuance in 2012, 2013, and 2014 set ever crazier records; 2015 is on track to set an even crazier one: close to $1.5 trillion.

That’s a lot of newly borrowed moolah. Much of it is being used to pay for dividends, stock buybacks, M&A, and other worthy financial engineering projects designed to inflate stock prices, though that strategy has turned into a sorry dud this year.

Junk bonds now make up $1.8 trillion of this pile of corporate debt, nearly double the $944 billion in junk bonds outstanding at the end of 2008 before the Fed saved the economy, so to speak. ...............(more)

http://wolfstreet.com/2015/11/13/moodys-warns-about-looming-credit-crunch-unnerves-with-comparisons-to-2008-2009/