“The end of the 10-year run is going to be a really challenging time for policymakers going forward," warns billionaire hedge fund manager Paul Tudor Jones.
Speaking at at the Greenwich Economic Forum this morning, Jones explained to investors that another hike in interest rates triggered by faster growth from U.S. tax cuts may cause the bubble in credit to pop.
“We’re going to stress test our whole corporate credit market for the first time...”
“From a markets perspective, it’s going to be interesting. There probably will be some really scary moments in corporate credit.”
And thos cracks are starting to show - dramatically...
And unless The Fed stops its so-called 'normalization' of the balance sheet, yields are going to explode and credit conditions will collapse:
The hedge fund manager said the next trade will be a “front-end rates trade” of figuring out when policymakers will cease interest rate hikes.
Jones is not alone.
As Josh Lohmeier, head of U.S. investment-grade credit at Aviva Investors, which manages more than $480 billion, notes:
"GE is a harbinger for what’s going to happen when large capital structures get downgraded,” said.
“It’s going to be messy, and it’s going to be painful.”
Additionally, Guggenheim’s Scott Minerd said Tuesday that GE’s selloff is just the start of a “slide and collapse” in investment-grade credit.
Jeffrey Gundlach, CEO of DoubleLine Capital LP, said corporate debt is the "most dangerous" part of the high-grade bond market.
Distressed-debt investor Marc Lasry is eyeing an eventual sell-off in the investment-grade market for his next opportunities, including bonds sold by GE if they become even cheaper.
It had better be different this time - or credit is in big trouble!!
Credit markets are fundamentals have never been more decoupled.