23 September 2013, by Tyler Durden (Zero Hedge)
Excerpt:
If the Fed was worried about 'froth' in the markets earlier in the year, then this chart should have them panicking.
Of
course, as Jim Bullard noted Friday, there is no bubble because
everyone knows there is no bubble but judging by the massive surge in
covenant-lite loan issuance, there is a bubble in forced demand for
leveraged loans.
At $188.7 billion, the 2013 issuance of
these highly unsafe loans (which have seen huge inflows since the Fed
started talking taper back in May) is almost double that of the peak of
the last credit bubble in 2007 and is five times the size of 2012 YTD
issuance at this time.
As Reuters notes, Covenant-lite loans
used to be reserved for stronger companies and credits, but are now so
common in the U.S. leveraged loan market that investors are becoming
wary of some credits with a full covenant package.
With corporate leverage at all-time highs, what could go wrong?
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