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Bond Markets Are Usually A Look Into The Future

Bond Market

This as Scandinavian Airlines Systems files chapter 11.

Bonds have sold off a ton this year — just look at Apple. It’s one of the most creditworthy U.S. companies — sitting on loads of cash — and you can pick up its bonds in the secondary market for a mere 70 cents on the dollar, down from around 100 last fall. Seems worrisome!

Well, the New York Fed has constructed a new index to evaluate just how distressed — and potentially dysfunctional — the corporate bond market is. The good news: It’s actually not that bad right now, Axios’ Kate Marino writes.

Why it matters: Economic growth is slowing, and the risk of recession is top of mind. What happens in the bond market can provide early signals of broader economic and market woes.

The big picture: The index shows that while corporate distress has zoomed up since the beginning of the year, it’s actually still below the median historical level.

If anything, this shows just how historically loose the conditions of 2021 were. Capital was cheap and abundant, and defaults were minimal — thanks to unprecedented monetary stimulus.

Now, we’re heading back to “normal.”

Axios Markets By Emily Peck and Matt Phillips · Jul 05, 2022