A small corner of the debt market has quietly grown to $1.4 trillion - and it has 'eerie similarities' to 2008
- An overlooked area of the debt markets has "eerie similarities" to the 2008 sub-prime mortgage crisis.
- Mark Zandi, the chief economist at the analytics arm of the ratings agency Moody's, argued that rising risk taking and falling standards of underwriting in the corporate bond and leveraged debt space are a big threat.
- The amount of leveraged loans to non-financial companies has now risen to around $1.4 trillion.
Wall Street may have just seen US stocks enter their longest bull market in history, but there are "eerie similarities" between one area of the market and the sub-prime mortgage crisis that triggered the last crash in 2008, according to research from the ratings agency Moody's.
Writing this week, Mark Zandi, the chief economist at the analytics arm of Moody's, argued that rising risk taking and falling standards of underwriting in the corporate bond and leveraged debt space are, at least partially, analogous to what happened in 2007 and 2008.
Noting that we are very much in the midst of the boom period of the business cycle, Zandi argued that such phases are generally characterised by "excessive risk-taking somewhere in the financial system."
"This fuels the boom and is eventually at the center of the subsequent bust," he said. ...
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