Ricard Murillo Gili (via Caixabank Research ) | The paralysis of economic activity will lead to a fall in global GDP not seen since 1930. Are there latent financial fragilities that could amplify this decline? In a more demanding financial environment, the high levels of debt will be put to the test, its quality will deteriorate and mechanisms that amplify economic stress could be activated due to the interconnections that exist between different assets.
Jefferson Frank ( via The Conversation) | Ratings agency Fitch is forecasting a doubling in defaults in 2020 on US leveraged loans, which refers to bank loans to businesses considered more risky. The agency expects a default rate of 5% to 6% this year, compared to 3% last year. The dollar value will exceed the previous high of 2009, and for retail and energy companies, the default rate could approach 20%.
Chinese corporate debt has not stopped growing since 2007 (it is around 160% of GDP). But given the level of reserves, Beijing does not yet understand the alarmism unleashed by international agencies.
ATHENS | By MacroPolis | The Bank of Greece (BoG) released on Friday the findings of a recent workshop in which representatives from the Finance Ministry, the EU, banks, corporates, international experts and consulting firms participated, generating a clear idea of what kind of debt restructuring would be needed for Greek corporates.
MADRID | The Corner | Although analysts see limited systemic implications for the Portuguese sovereign and the rest of the periphery, the BES vaudeville has put something bigger on the table: changes at the global corporate debt market. Spanish Popular bank and construction company ACS both postponed a planned issue of the riskiest bank debt because of “heightened volatility” in credit markets. Goldman Sachs delayed a planned inaugural issue of a new type of bond that offers investors three levels of protection on the event of default, Bloomberg reports.
NEW YORK | By Ana Fuentes | Is there a risk bubble in the tech stocks? For Jonathan Cohen, CEO of TIIC Capital, a company focused on corporate debt investments, there is indeed, and it’s greater than before. However, one can still get very lucky since there are real businesses making real profits. He gives us his recipe for picking stocks and debt issues, although he confesses their “forecast for 2014 is uncertainty.”
LONDON | Is that a global bond boom we have before our eyes? Morningstar research said the latest European asset flow data showed that long-term funds enjoyed a strong first quarter this year, receiving more than €50 billion of new investor assets. Of this, more than 70 per cent went to fixed-income funds, while equity funds, by contrast, had net redemptions for March and only slightly positive inflows between January and March….