Author Topic: HY Corporate Credit Meltdown  (Read 2878 times)

P2PFact

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HY Corporate Credit Meltdown
« on: December 14, 2015, 10:17:39 PM »
This is what's going on at HY credit market at the moment. I think P2P is classified as HY or structured credit. Interesting to see if the fear will spread into this space. Since there is no secondary market, don't think there will be a sell off. But interesting to see if risk appetite of institutional guys will shrink going forward. 

http://www.bloomberg.com/news/articles/2015-12-14/asian-bond-risk-surges-to-two-month-high-on-contagion-concerns

thezfunk

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Re: HY Corporate Credit Meltdown
« Reply #1 on: December 15, 2015, 10:08:40 AM »
From my personal experience, I can say that in the past month I have had to discount notes more than usual to get distressed notes to sell on Folio.

Lovinglifestyle

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Re: HY Corporate Credit Meltdown
« Reply #2 on: December 15, 2015, 01:55:22 PM »
From my personal experience, I can say that in the past month I have had to discount notes more than usual to get distressed notes to sell on Folio.

+ 1

Fred93

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Re: HY Corporate Credit Meltdown
« Reply #3 on: December 15, 2015, 04:46:04 PM »
I don't put P2P loans and high yield bonds in the same category.

I believe the dip in junk bonds will drive more investors to P2P loans.

P2PFact

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Re: HY Corporate Credit Meltdown
« Reply #4 on: December 15, 2015, 09:01:54 PM »
I don't put P2P loans and high yield bonds in the same category.

I believe the dip in junk bonds will drive more investors to P2P loans.

Really? They will move from something not that liquid (HY bond) and got a lot cheaper lately to something with zero liquidity(P2P loan) and the same price?

The other thing is that HY/Junk bond got repriced and got a lot cheaper recently. Interesting to see if P2P loans will get repriced. LC loans is linked to fed fund rate I believe. But looks to me 25 bps bump is certainly not enough reprice. Especially for long duration one like 60 month loans.

nonattender

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Re: HY Corporate Credit Meltdown
« Reply #5 on: December 16, 2015, 01:10:38 PM »
LC loans is linked to fed fund rate I believe.

Journalists seem to be on fed watch, don't seem to get that: while the balance sheet lenders may see slight effect due to FFR move, LC
(marketplace) not exposed.  Can do mental gymnastics and say, sure, it's in-directly exposed in xyz ways, but, no real direct correlation.

What "link" do you believe LC loans have with FFR?  I can tell you this:  investor demand for LC loans is not going down, it's going up...
Don't think the prospect of 25 bips increase on deposit rates, sometime maybe in the future, is going to tamp that demand down at all.

*shrug*
A little nonsense now and then is relished by the wisest men.

Fred

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Re: HY Corporate Credit Meltdown
« Reply #6 on: December 17, 2015, 04:14:41 AM »
What "link" do you believe LC loans have with FFR? 

I do not think the "link"' between LC loans and FFR is linear.

My notes shows that LC B5 notes used to command 11.99% (~2014); today it was only 11.22%.  During this period, FFR was essentially unchanged, forcing one to conclude that LC rates are inversely related to FFR.

Ran

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HY Corporate Credit Meltdown
« Reply #7 on: December 17, 2015, 09:14:07 AM »
LC coupon rate is a combination of risk-free interest rate + credit spread. Credit spread is notoriously volatile. In the current environment, 25bp risk-free interest rate bump is negligible for B grade or higher since their coupon rate is mainly credit spread. However, LC may have to increase A1-A3 grade rate to make it competitive when fed rate increases further

P2PFact

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Re: HY Corporate Credit Meltdown
« Reply #8 on: December 22, 2015, 11:03:27 PM »

nonattender

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Re: HY Corporate Credit Meltdown
« Reply #9 on: December 22, 2015, 11:56:30 PM »
A little nonsense now and then is relished by the wisest men.