Intermoney | In the case of credit specifically, a situation is already beginning to take shape in the US that worries us quite a bit and which will end up spreading throughout the world. Namely, the forced debt sales for companies that lose their investment grade rating. In the current market environment, this would translate into the closest thing to a sale of balances. This situation has already forced Western Asset, a fixed income manager with $460 billion under management, to apply for a waiver for a Fresno County public employee pension fund. This is in order to gain time (from 3 to 30 days) to reorder its investment grade credit portfolio, after Occidental Petroleum and American Airlines’ downgrades led the fund to exceed its debt limit below BBB-. The Fresno fund only has $190 million invested with Western Asset. But it is a good example of what is about to happen at a time when firms like Ford, Macy’s, Kraft Heinz or Delta are already inflated with a list of junk bonds that will quickly grow.
This is bad news when some of the Fed’s moves to improve corporate financing are still not bearing the expected fruits, as is happening in the commercial paper market. In the case of debt with an A2, P2 or F2 rating, which would correspond to good credit quality in line with an A rating in the long term, 3.45% would be required for non-financial commercial paper according to the Fed’s own data as of March 31.In addition, the volume of non-financial commercial paper with the aforementioned credit rating fell by $35.2 mm. in the week of March 25. This clearly shows that the Fed has not yet managed to fill the gap left by monetary funds (hit by substantial reimbursements) in this market.