Remember a week ago when every TV anchor, pundit, asset-gatherer, and commission-taker stormed onto mainstream media and proclaimed the credit market collapse “fixed” because prices had ‘stabilized’ over the holiday period “proving that 3rd Avenue was a one off” and this dip was a buying opportunity? Yeah, well that was all complete crap… as Investment-Grade cost of funding hits a 3-year high, HY bond spreads blew out to cycle wides, ‘triple-hooks’ soared to their worst levels in almost 7 years, and credit protection costs rose by the most in years.
“Stabilized” (during the Christmas break) was the new “everything is awesome”… but now…
High Yield Bond ETFs are dumping…
The cost of high-yield credit protection is soaring…
Equity prices are starting to catch down to that reality…
As is the cost of equity risk protection (VIX following August’s “wait what” reality-wake-up call path)…
And that means trouble for the only pillar of non-economic stock buying left… Investment-Grade credit risk just hit 3-year highs crushing the economics of any debt-funded shareholder-friendly activities…
And finally, where it all started – CCC ‘triple-hooks’ credit spreads have re-spiked to cycle wides…
But apart from that – yeah, credit is “fixed.”
