Cracks Are Starting to Form in Risky Credit

The video discusses the recent decline in US junk bonds, highlighting increased investor caution in riskier parts of the bond market. It explains the rising yield premiums for triple C rated debt compared to double B rated debt, reaching levels last seen in 2016. Despite this caution, there is a notable increase in high yield bond issuance, with the fastest pace since 2014. Investors are demanding more prudence from issuers to mitigate potential losses in future downturns.

What is the main reason for the recent decline in US junk bonds?

• A decrease in interest rates

• Increased investor discretion in riskier markets

• A new government regulation

• A sudden drop in oil prices

What is the significance of the extra yield demanded for triple C rated debt?

• It shows a preference for lower-rated bonds

• It reflects a higher risk premium for riskier securities

• It indicates a decrease in investor caution

• It suggests a stable market environment

How does the current extra yield for triple C rated debt compare to past levels?

• It is higher than in 2016

• It is similar to levels seen in 2016

• It has remained unchanged since 2014

• It is lower than in 2016

What is unusual about the current high yield bond issuance?

• It is unaffected by market conditions

• It is at its fastest pace since June, despite investor caution

• It is happening despite a lack of investor caution

• It is at its slowest pace since 2014

How are investors influencing issuers in the current bond market?

• By demanding higher interest rates

• By pushing for more prudent issuance terms

• By encouraging more risk-taking

• By reducing the amount of debt being sold