Debt Rally Cracking as Double-Dip Fears Haunt

[marmar]

Debt Rally Cracking as Double-Dip Fears Haunt: Credit Markets
By Shannon D. Harrington and Sapna Maheshwari


Aug. 24 (Bloomberg) -- The rally that drove corporate bond prices to the highest in six years is showing signs of strain as worsening economic data rattle investor confidence that the U.S. can avoid relapsing into recession.

A benchmark gauge of U.S. corporate credit risk for companies ranging from Alcoa Inc. to Wal-Mart Stores Inc. has climbed for four days, reaching the highest in more than five weeks. Relative yields on corporate bonds have been little changed this month, after tightening in July.

The latest sign of economic weakness came today with a report showing sales of existing houses plunged by a record 27 percent in July. Standard & Poor’s warned that if conditions worsen further, bond sales by high-yield, high-risk companies may slow from this year’s record pace.

“It’s inevitable that we fall into a double-dip recession,” said Komal Sri-Kumar, who helps manage $118 billion as chief global strategist at TCW Group Inc. in Los Angeles. “The employment situation went into a double-dip; housing is going into a double-dip as we see from today’s numbers; and now the next stage is the overall economy will go into a double- dip.”

The Markit CDX North America Investment Grade Index, tied to the debt of 125 U.S. and Canadian companies, rose 3.6 basis points to a mid-price of 113 basis points as of 6:22 p.m. in New York, the highest since July 16. The extra yield investors demand to own U.S. investment-grade corporate bonds instead of Treasuries with similar maturities has climbed 2 basis points since July 30 to 190 basis points, after falling to as low as 186 on Aug. 9, according to Bank of America Merrill Lynch index data. ..............(more)

The complete piece is at: http://noir.bloomberg.com/apps/news?pid=20601087&sid=a7rorLEmlJNo&pos=6

[DCBob]

1. Wow. Why are so many desperately trying to convince us another recession is coming??

No doubt there will be if they scare enough people into believing it.

[marmar]

2. People don't need to be "convinced" of it.....They know that already.

If anything, all the phony media "recovery" cheerleading is coming to a wane.

[villager]

3. Yes - why are so many people just *pretending* to be jobless and broke!?

That's one hell of a goof they're pulling on everyone else!

[cowman]

4. 1000+ n/t

[DCBob]

7. That's a serious problem but unemployment in of itself does not define a recession.

Recession is defined by negative GDP and we have been no where near negative GDP for several quarters.

[Skittles]

9. yes, pay no attention to real life

just look at the purty numbers!

[DCBob]

10. Recession is the wrong word for the situation we are now in..

I dont know what the term is but its not a recession in technical terms.

[Lucky Luciano]

11. FYI Q3 1929-Q3 1933 was the worst recession of all.

...and there were 4 positive quarters of GDP growth during that time which averaged 8%.

Also, the starting months of1930 saw a 50% rally in the stock market from the lows.

Do you know anyone piningfor the good times of 1930?

[DCBob]

14. if no double dip occurs, what is happening now will not be considered a recession.

it will just be called a very slow growth period with high unemployment.

[Lucky Luciano]

16. Tell that to the NBER - the group that declares such things.

They have not declared anything yet though they do lag of course.

[customerserviceguy]

23. You make an excellent point

Illusory sucker rallies do not mean the end of hard times. They're just an effort by the well-connected to unload stuff that they can make seem more than worthless.

I do fear the double dip, and the President will own the second dip.

[Skittles]

12. the term is "truly fucked"

[DCBob]

18. yeah, that may be an accurate term.

but there is still a chance we can turn it around.

[alterfurz]

21. or as phrased elsewhere on DU (quoting Roseanne?):

"We are so beyond fucked that the light from fucked won't get here for 10,000 years."

[villager]

15. unless you're one of the growing multitudes of the unemployed.

n/t

[Skittles]

8. huh?

why are they desperately trying to convince us we ever got out of the "first" one?

[girl gone mad]

13. lol..

[DCBob]

17. lol back..

[taught_me_patience]

19. Q2 GDP will be revised soon down to 1.5% or so

and Q3 will be worse. I'd say there is a 50/50 chance of a negative Q3 GDP. Many indicators have turned very negative this quarter. Where there is smoke, there is fire.

[ShamelessHussy]

20. yeah, it's all in their heads

[sendero]

22. Because it is..

... and everybody with 2 brain cells to rub together knows it.

[msongs]

5. our terrorist US hater corporations could recall some of those offshored jobs...... nt

[cowman]

6. That won't happen

because it will cut into their bloated profits