US corp distress could mean big bankruptcies-report

[Pale Blue Dot]

Source: Reuters

NEW YORK, July 28 (Reuters) - The amount of U.S. investment-grade bonds trading at distressed levels has risen close to an all-time high, a sign that a wave of mega-bankruptcies is likely on the way, a veteran high-yield strategist said.

Bonds are considered distressed when their yields, which move in the opposite direction of prices, exceed 1,000 basis points over those on U.S. Treasuries.

The distressed trading levels in both investment-grade and speculative-rated bonds "suggests that we will see record-sized bankruptcies by volume into 2009-2010," said Christopher Garman, writing in high-yield research publication Leverage World.

About 1.8 percent of high-grade bonds by par value are trading at distressed levels, slightly under an all-time high of 2.4 percent, according to Garman, publisher of Leverage World and former head of high-yield strategy at Merrill Lynch & Co Inc.

..."The largest corporate bankruptcies on record often follow this level of distress," Garman said.

Read more: http://www.reuters.com/article/bondsNews/idUSN2847036220080728?sp=true