Board-Ansicht
Mix-Ansicht- Noch ein Hammer - R.Deutsch, 14.07.2002, 10:47
Noch ein Hammer
The State Of Play:
While analysts are"celebrating" the rise in Treasury bonds at the expense of the collapsing U.S. stock markets, the situation on the U.S. corporate bond market is QUITE different."Junk" bonds are flooding the market in what is described as"unprecedented amounts". It would be bad enough if this debt paper had originated as junk (high risk - high return) bonds, but this is not the case. What the U.S. corporate bond market is suffering from is a virulent case of"fallen angels".
"Fallen angels" are debt issues that originated as investor grade paper which have since had their ratings slashed to junk status. Merrill Lynch maintains a high yield bond index. In March 2002, there was only $US 1.7 Billion worth of fallen angel debt paper in this index. By May, the fallen angel component had exploded to $US 44.9 Billion. And as of the end of the first half of 2002, on June 30, the total had reached $US 79.6 Billion - with another $US 80 Billion on the edge of being downgraded to"junk".
The problem here is simple. Many institutional investors have rules which mean that they cannot hold"junk" paper in their portfolios. These investors are FORCED sellers of these bonds. And with precious few if any buyers, either inside or outside the U.S., this is causing prices to plummet and yields to soar. The situation has become so bad that Mr Bill Gross, the lead manager for the world's biggest bond investor, Pacific Investment Management, has said that he has decided to avoid the U.S. corporate bond market ALTOGETHER. The U.S. corporate bond market is on the verge of a freeze, just like in 1998.
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