Murky corporate debt revealing a key risk for the US economy.
Leveraged loans perhaps leading overall stocks to the downside. pic.twitter.com/EJQ1naPR01
— Otavio (Tavi) Costa (@TaviCosta) October 8, 2019
Sudden drops reflect growing distaste for shakier issues
Energy leads list of losers with $12 billion of loans affected
Barely noticed in a corner of the financial markets, leveraged loans originally worth about $40 billion are staging their own private meltdown.
Loans tied to more than 50 companies have lost at least 10 percentage points of face value in just three months, according to data compiled by Bloomberg. Some have dropped a lot more, with lenders lucky to get back just two-thirds of their investment if they tried to sell.
Investors are skeptical.
The Fed “will struggle to convince markets that a resumption of Treasury purchases to avoid future money-market turmoil is not another round of quantitative easing”