Search Results for: default risk – Page 5

Inflation dominated Q3 financial news, and the resulting short rate squeeze is biting while credit volatility is rising and the COVID recovery is running out of steam. Risk indicators are high in the UK, and oil and gas price volatility has brought havoc to Europe. In North America, weaker credit trends are appearing in several sectors. Believe it or not, there are some bright spots amidst this turmoil. This whitepaper elaborates on some of these trends and shows where credit could be headed next.

The recent award of the 2022 Nobel memorial prize in Economics to Bernanke, Diamond and Dybvig for their work on banking regulation and liquidity highlights the connection between credit and liquidity, making the point that credit assessments are a form of market information.

European Governments are pledging hundreds of billions of Euros in financial aid to power generators and distributors, plus support for consumers facing massive energy price hikes. But an even larger crisis may be lurking in European energy trading, with the FT reporting sector margin requirements as high as €1trillion – vastly in excess of current sector liquidity.

A growing list of countries have already seen Sovereign ratings slide in the past two years due to COVID costs; some now face a real risk of outright default as the war in Ukraine drives food, fertilizer and energy prices higher.

With tighter global monetary policy already hitting heavily indebted households and firms, could default rates also reach record levels? This insight looks at the relationship between the Fed Effective rate and US Business Loan Delinquencies.

Market risk indicators are increasingly important amid global tensions and interest rate volatility. Consensus credit data offers a view beyond the VIX index and credit spreads – and recent data suggests financial institutions see the current problems translating into higher default rates.

As credit markets become more challenging and volatile amid Fed tightening and expanding credit spreads, consensus data provides a stable reference point for assessing underlying portfolio credit risk. This report analyses a universe of bonds tracked by the iBoxx High Yield Index.