US junk bond issue hits record as GDP slows

Consumer demand, Economic growth, Financial Events, Leverage

Junk bonds.pngAs noted by a blog reader last week, retail investors are throwing caution to the winds.

Unwilling, or unable, to adjust their lifestyles to cope with lower interest rates on government bonds, they have rushed to instead buy higher-yielding ‘junk bonds’.

These are less than normal ‘investment’ grade, and offer increased yield in exchange for higher risk of default.

Clearly, however, investors are focused on the yield, not the risk. The Wall Street Journal notes:

• Junk bond sales to date are up 80% versus 2009, at $155bn
• This week saw $15.4bn sold, an all-time record

Meanwhile, overall US economic conditions continue to disappoint. The latest trade figures prompted many economists to reduce Q2 GDP estimates still further. First estimated at only 2.4%, very low for the middle of a supposed recovery period, some are now suggesting it could have fallen below 2%.

GDP in export-led countries such as China and Germany has soared in H1. But this growth will be cut short in H2, if the US economy is indeed sliding back towards recession. After 2009’s downturn, the US’s share of global GDP has risen to 25%, according to latest World Bank figures.

Junk bond investors may be partying for the moment. But when even the Chairman of the US Federal Reserve describes the outlook as being “unusually uncertain“, the blog maintains its preference for strategies that prioritise return of capital versus return on capital.

PREVIOUS POST

Global power shift to the East a "half-truth"

12/08/2010

An interesting opinion piece in today’s China Daily suggests the concept t...

Learn more
NEXT POST

The Drawn-Out Downtrend phase of the Crisis begins

16/08/2010

“Humankind cannot bear very much reality” TS Eliot, 4 Quartets, 1936...

Learn more
More posts
The New Normal for global industry
31/05/2020

The global chemical industry is the third largest sector in the world behind agriculture and energy,...

Read
Hertz goes bankrupt as non-essential consumer demand disappears
24/05/2020

The US Federal Reserve has now spent $7tn bailing out Wall Street. But it couldn’t save the 10...

Read
Debt, deflation, demographics and Brexit set to challenge London house prices
17/05/2020

London property websites haven’t used the word “reduced” for many years. But it...

Read
Smartphone sales head into decline as affordability becomes key
10/05/2020

The smartphone sales decline accelerated in Q1, as Strategy Analytics report: “Global smartpho...

Read
The bill for two decades of doomed stimulus measures is due
03/05/2020

The Financial Times kindly made my letter on the risks now associated with central bank stimulus the...

Read
Local supply chains replace global trade as world starts to “do more with less”
26/04/2020

Something quite dramatic is happening in the global economy.  Of course, Wall Street analysts still...

Read
Financial markets enter their Convulsion phase
19/04/2020

Many companies and investors are still comparing today’s downturn to the 9-month hiccups seen afte...

Read
World risks moving from Denial into Anger as the Paradigm of Loss moves forward
12/04/2020

The head of the IMF has warned again on the likely scale of the economic depression ahead: “Gl...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more