The US stock markets are harboring the fond notion that the sovereign-bank debt pile-up in Europe has no real implications across the pond, no doubt out of professional participants’ hope to retain solid gains thorugh year-end bonus setting. The debt markets are saying otherwise. Credit market risk aversion typically precedes a stock market correction, but bond markets can also send false positives.
What is noteworth is how pronounced the shift in sentiment was. From Bloomberg:
Issuance has slumped 31 percent since Nov. 15, compared with the same period a year earlier, after surging 34 percent in the first half of the month, according to data compiled by Bloomberg. Plunging returns on debt of borrowers from France’s Credit Agricole SA to Bentonville, Arkansas-based Wal-Mart Stores Inc. are dragging bonds to a 1.08 percent loss in November, Bank of America Merrill Lynch index data show.
And note that the jitteriness isn’t just for high yield paper, but across the board:
“There’s been a lot more volatility in the high-yield and investment-grade markets here in the U.S. because of what happened in Greece in the spring and Ireland now,” said Bonnie Baha, head of the global developed credit group at DoubleLine Capital LP, which manages $6.8 billion in Los Angeles….