Two days ago, when looking at the latest “Senior Loan Officer Opinion Survey on Bank Lending Practices”, we showed that Fed lending standards had tightened for the third quarter in a row, and pointed out that in recent history this has never happened without either a default cycle, or a recession, following immediately after.
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Today, as part of its brand new daily report “Credit Bites” titled “3 in a row…” Deutsche Bank takes on the same subject, and notes that the April survey showed that on balance, banks tightened lending standards on commercial and industrial loans during Q1, even if lending standards on loans to households were said to have eased. It then updates a couple of charts DB uses to show the correlation between the C&I Loan Standards and US HY defaults (12 months on) and also that the yield curve is a good lead indicator of the direction of lending standards around 18 months in advance.
This post was published at Zero Hedge on 05/04/2016.
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