Emerging Market Defaults Rising to Danger Zone; US Junk Bonds Crater

OtterWood Capital:

According to Standard & Poor’s corporate defaults in emerging markets are up 40% year over year and are now at levels not seen since 2009. Additionally the default rate in emerging markets has hit 3.8% surpassing the 2.8% default rate in the US for the first time in years.

This is not the peak.

ZeroHedge: Did Something Blow Up in Junk?

This time, the CCC index is by itself in showing “something.” Neither the Master II nor the S&P/LSTA Leveraged Loan 100 are following suit. Whether or not that suggests another pricing problem isn’t clear, but the fact that the CCC index actually surged Monday to 16.61% and was reported again yesterday at 16.60% begins to indicate this was an actual trading outcome. In other words, as junk bonds have been the leading edge to the domestic end of the “dollar” run, this demands close and ongoing scrutiny in light of a potential escalation. After all, this is just another indication of how advanced the deterioration has become, when the “usual” carnage and selloff is no longer noteworthy, giving way to only the (possibly) spectacular.