A Citigroup debt strategist created a scary-looking clock
Matt Turner 2017-01-09 19:19:04

"How long till the Teflon wears off?"

That's the big question for Matt King, a credit strategist at Citigroup who has a big note out on the bond market.

The note focuses on the performance of corporate bonds, pointing out that while corporate leverage has increased, and there is more uncertainty in the market, spreads are compressing — suggesting traders are actually pricing in less risk.

"The improbable not only happened, it did so without ruffling markets," he said, referring to the election of Donald Trump as US president and the UK's vote to leave the European Union. "There is something strange going on," he added.


He points the finger at central-bank spending, saying it is the "key ingredient in the mix," and critically asks how much longer this can continue.

King notes that the fundamentals of the bond market are deteriorating, with interest coverage ratios (a company's earnings before interest and taxes divided by the company's interest expenses) deteriorating.

Net debt has been increasing, while growth rates for earnings before interest, taxes, depreciation, and amortization are negative.

That would normally suggest that the bond market is in "bubble burst" territory, which is normally bad for the credit and stock market. In fact, emerging-market bonds and high-yield debt are already past this point.

So what would set the alarm clock ringing? Higher real yields.

A pickup in yields not matched by a pickup in growth would put the bond market on the edge, with King saying a 50-basis-point increase in yields could tip the market over.

(本文经扑克投资家采编,并已标注来源,转载请注明原始出处。添加扑克投资家微信号:puoketrader,第一时间获取大宗产业与金融领域最有温度的研究资讯。)
0 条评论
登录 后评论
推荐文章
面对泡沫,现“金”为王还是手中有“房”?这篇文章讲清楚了
一切终将幻灭:周期奥义在于对过程的追逐,你的一生是它最好的诠释,附周金涛21篇重要文章
黎明前的黑暗:陶冬最新演讲——中国经济后十年两大趋势(个性化消费、人民出海)
深度好文:因为印度,中国已经没了退路
重磅内幕:当年的四万亿决策曝光,有人现场删稿
致命的自负:关于英国退欧,万一你们都错了呢?
X
取消
改版反馈
关注扑克投资家