The Mining GFC smouldered overnight as the our Janet barely moved the needle. The US dollar firmed a little:
Commodity currencies were mostly up anyway:
Brent oil was flat:
Base metals a little weak:
Miners too:
US high yield debt held its losses and EMs weakened:
And today’s chart de jour is from Zero Hedge and gives you some idea of where we’re going and why it’s problematic. US shale and its debt load is not just a junk bond phenomenon:
Bloomberg has more:
Moody’s expects the U.S. default rate to reach the highest in six years in 2016, and a growing pool of investment-grade energy debt will most likely be downgraded to junk in the near future.
Chesapeake Energy is fast heading toward default, with Standard & Poor’s calling its debt “unsustainable.” Bonds of California Resources, Linn Energy, Energy XXI, Chesapeake and EP Energy have all lost more than 75 percent since the end of July.
Without a doubt, the relentless carnage in energy debt is spilling over into the broader market, especially as prices continue to plunge, with Goldman Sachs seeing the possibility of crude prices dropping below $20 a barrel after rising as high as $107 in 2014.
…This has reduced investors’ willingness to lend to other companies, even outside the energy sector, especially those with business plans that are less than rock solid.
Brace!
