Junk Bond Debt Covenant Quality Drops To All Time Lows

Jon Alternative Media, Blogosphere, Market Commentary

By Mark Rzepczynski of the Disciplined Systematic Global Macro Views blog
Corporate spreads are tight and there is little room for further reduction given the absolute level of spreads.

The reach for yield may be at an extreme. The bond spread is the compensation given bondholders for taking on the risk of corporate debt; consequently, it should become a concern when the quality of bond covenants or protections declines with spreads. Of course, if risk is declining, this is not the case, but at this point in the credit cycle it is hard to make that argument. An inverse relationship between spreads and covenant weakness means you are getting less compensation and less protection for the same risk, all things equal.

This post was published at Zero Hedge on Oct 7, 2017.