High Yield

Every now and then the general public gets a chance to see just how valid the green shoots theory really is. Next Friday may prove to be just such a case. On this date, 20 of some of the gnarliest and most troubled stressed and distressed high yield credits have a simultaneous IOU due to their respective lenders, either in the form of an interest payment or outright maturity. Zero Hedge has compiled the list of the 20 most interesting suspects to watch carefully.

At the end of the day fund flows talk and TV propaganda walks (and both have a 30 day grace period).

While the vicious love quadrangle (no pun intended Mr. Rattner) of Bernanke, Geithner, Lewis and Vikram pound the table on just how well lubricated the credit markets have become, the truth is that aside from ultra high quality Investment Grade names and TLPG-backed financial issuance, the credit market is for all practical purposes still in critical condition and about to be carted off to the morgue. The fact is that YTD issuance in the riskier HY and loan markets (see chart below) stands at a meager $22 billion - the lowest level in recent history.

While the vicious love quadrangle (no pun intended Mr. Rattner) of Bernanke, Geithner, Lewis and Vikram pound the table on just how well lubricated the credit markets have become, the truth is that aside from ultra high quality Investment Grade names and TLPG-backed financial issuance, the credit market is for all practical purposes still in critical condition and about to be carted off to the morgue. The fact is that YTD issuance in the riskier HY and loan markets (see chart below) stands at a meager $22 billion - the lowest level in recent history.

While the vicious love quadrangle (no pun intended Mr. Rattner) of Bernanke, Geithner, Lewis and Vikram pound the table on just how well lubricated the credit markets have become, the truth is that aside from ultra high quality Investment Grade names and TLPG-backed financial issuance, the credit market is for all practical purposes still in critical condition and about to be carted off to the morgue. The fact is that YTD issuance in the riskier HY and loan markets (see chart below) stands at a meager $22 billion - the lowest level in recent history.

According to a research report by Jim Reid of Deutsche Bank, the 5 year cumulative default rate for US High Yield names will hit 53% assuming 0 recovery rates, and 69% assuming average recoveries. In Europe things are even worse: 65% and 81% respectively.