The State Of Illinois Is “Past The Point Of No Return”

Unless used for capital improvements, any new Illinois State borrowing, regardless of security structure, will amount to nothing more than kicking the can further down the road. Markets remain open to uncreditworthy government borrows longer than they should. In a low interest rate environment, investors will stretch credit standards. Benchmark bond ratings are at variance with the rating agencies. ***
Everyone knows Illinois’ financial condition is poor. Conventional thinking seems to be that a bond default, should that happen, would be many years in the future. Pardon me, but wasn’t that the thinking right up to Puerto Rico’s, ‘We can’t pay’ announcement?
To answer the question of just how badly off is Illinois, I assembled a list of key creditworthiness indicators and applied them to New York, a highly rated state, and Illinois.

This post was published at Zero Hedge on Oct 18, 2017.

Front Seat in Shanghai: Jig is Up

Something big is afoot in the Shanghai Gold market. It seems that we are at the door of the RESET finally, with China being betrayed by the USGovt and USFed in concerted collusion. The attempt to reduce the USDollar while maintaining ultra-low bond yields seems the final straw. The inference is made that the jig is up finally, and a significant turning point is upon us.
A contact at Evolution Consulting has reported that his best contact notified him that VIPs are being invited to take tours of the Shanghai Gold Exchange operation. This man was among one of the guests. These tours are not being arranged in some congenial welcoming event, not at all. Rather they are informational and official in granted preview. They are almost surely being staged to inform the opposition that it is all over for them now. With a cherry on top, the VIP guests were required to pay for the tour. The above juicy tidbit was provided by a client, passing the word along. Something big is afoot.
China seems to have changed its position toward aggressive in the gold market introduction with gusto and emphasis. Conclude easily that where there is smoke, there is fire, and the heat will be on physical gold metal demand in Asia. In turn the pressure will be put on the USDollar, whose custodians are not honorable and for perhaps the last time, have betrayed the Chinese. Lower USDollar valuation combined with already chronic low bond yield could have turned the Chinese hostile in the wake of the USFed rate hike. The Jackass raises the conjecture (stronger and more classy than guess) that the USGovt and its bankster masters lied to China about a rate hike, and the Chinese are very angry. The sleazy central banker crew defaulted on the gold lease from 1999, evident in 2014. The same sleazy vile crew have used tricks like bank derivatives to create phony bond demand, tricks like Reverse REPO to undo the last rate hike by ramping up to dangerous levels the bond leverage, alongside massive bond default on legacy bonds from nearly a century ago. The fact that a bond is old does not invalidate the bond’s integrity and requirement for honoring it. The criminal central banker crew in all likelihood stole at least $3 trillion in Saudi USTBonds as well, which serve as ESFund core. China has probably seen enough, and will proceed with the Global Currency RESET. Their nation is under stress, and the imposition of the Gold Standard should right their course well enough, even if it derails the United States to the point of entry into the Third World.

This post was published at GoldSeek on 17 March 2017.

China supervisory body approves launch of credit default swaps soon

One of China’s interbank market supervisory bodies has approved the launch of credit default swaps, two sources with direct knowledge of the matter told Reuters on Thursday, signifying another step forward towards helping firms hedge rising risks in the country’s corporate bond market.
The National Association of Financial Market Institutional Investors (NAFMII), which supervises issuance of commercial paper and some other types of debt in China’s interbank bond market, has already notified relevant institutions to prepare, and will soon release guidelines for trading, the sources said.
Credit default swaps are a type of derivative providing insurance against third party defaults, and were widely used in the lead-up to the financial crisis in the United States.
Bond defaults have risen quickly in the past year and a half in China following many years when most debt was assumed to enjoy an implicit government guarantee. Market participants still have few formal hedging tools to protect against such risk, however, which has added urgency to efforts to introduce default swaps in China.

This post was published at Daily Mail

THE SUBPRIME U.S. ECONOMY: Disintegrating Due To Subprime Auto, Housing, Bond & Energy Debt

The U. S. financial system continues to disintegrate even though most Americans hardly notice. The system is being gutted from the inside out… much the same way a chronic disease weakens a patient even before any symptoms are felt. However, we are already experiencing painful symptoms as U. S. economic indicators continue to weaken.
Here are just a few of the recent headlines:
Energy Giant Schlumberger Fires Another 8,000 As ‘Market Conditions Worsen’ in Q2
The Financial System Is Breaking Down At An Unimaginable Pace
Potential Crisis Triggers Continue To Pile Up In 2016
Just In Time – – Big Wall Street Housing Investors Cashing-Out On Housing Bubble 2.0
Corporate Bond Defaults Hit Highest Rate Since Financial Crisis
These are just some of the recent headlines pointing to BIG TROUBLE AHEAD. However, the U. S. financial system is in dire shape due to the SUBPRIMING of the entire economy. Today, anyone can purchase a car for little or nothing down and finance it for 84 months. The U. S. housing market is also in the same predicament.

This post was published at SRSrocco Report on on July 21, 2016.

Gold Investment Slows, Soft Summer ‘Risks $1300’ But Bond Defaults ‘Will Spike’ as Japan, Eurozone Deny Fresh Stimulus

Gold investment prices rose from 3-week lows but struggled to hold gains versus major currencies on Thursday as world stock markets retreated from new all-time highs amid news that neither Japan nor the Eurozone plan to add more monetary stimulus for the time being.
Briefly topping $1320 per ounce, 1200 in Euros and 1000 for UK investors, gold edged back at lunchtime in London as the European Central Bank announced no change to either its QE bond-buying or zero refinancing rate, nor a further cut to its 0.4% negative interest rate on commercial bank deposits.
European equities meantime slipped for the first session in five as commodity prices edged higher with major government bond yields.
Investment gold had earlier sunk 1.1% versus the Yen, briefly falling below 4,500 per gram as the Japanese currency soared following a BBC interview with Bank of Japan chief Haruhiko Kuroda in which he ruled out printing and giving money to government or business – so-called ‘helicopter money’ – to try and end 27 years of asset-price, GDP and consumer-price deflation.

This post was published at FinancialSense on 07/21/2016.

Global Corporate Defaults Just Hit 100, On Pace To Surpass Financial Crisis Record

The bizarre financial paradoxes unleashed by central planning continue.
While the S&P rises to new all time highs day after day, the IMF is about to downgrade global growth again, $13 trillion in global bonds trade with a negative yield, and the shape of the US yield curve is where it was the last time the US entered a recession. But what remains the most perplexing aspect of the unprecedented disconnect between market surreality and fundamentals, is the ongoing surge in corporate defaults, which is now on pace to surpass 2009, the worst year in history for corporate bankruptcies.
According to S&P, with half of 2016 in the history books, corporate bond defaults just hit the milestone “century” mark, or 100, last week, rising by 50% from the number of bankruptcies at this time last year and the highest level since the US emerged from recession in 2009. The number rose by four to 100 in the first full week of July, as defaults in the US oil and gas sector ratcheted higher, according to Diane Vazza of S&P Global Ratings, the FT reports.
As a result, the total amount of defaulted debt has risen to $154 billion.
But what is most troubling is that at the current run-rate, with half of 2016 still to come, the global debt default total is on pace to surpass 2009 for the all time corporate bankruptcy record.

This post was published at Zero Hedge on Jul 15, 2016.

Great American Oil Bust Rages on; Defaults, Bankruptcies Soar

How much worse is 2016 than 2015?
Junk bonds, trading like stocks since February, have skyrocketed and yields have plunged. But that doesn’t mean that the bloodletting is over.
The trailing 12-month US high-yield bond default rate jumped to 4.9% at the end of June, the highest since May 2010 as the Financial Crisis was winding down, Fitch Ratings reported today. The first-half total of $50.2 billion of defaults already exceeds the $48.3 billion for the entire year 2015.
Energy companies accounted for 56% of those defaults. The energy sector default rate shot up to 15%. Within it, the default rate of the Exploration & Production (E&P) sub-sector soared to 29%!
And the default party isn’t over: ‘Despite the run-up in prices since the February trough, there will be additional sector defaults, with Halcon Resources expected to file imminently,’ Fitch reported.
Issuance of junk bonds in the first half has plunged 34% from a year ago, to $120.5 billion, according to the Securities Industry and Financial Markets Association (SIFMA), as junk-rated energy companies are having one heck of a time borrowing money and issuing bonds. The fact that investors – who’ve now been burned for nearly two years – are reluctant to extend new credit to teetering oil & gas companies precipitates their default and bankruptcy. Fitch:

This post was published at Wolf Street by Wolf Richter ‘ July 12, 2016.

Goldman Prepares To Turn Bearish On Oil Again; Boosts 2016 Bond Default Target By 25%

Not content with releasing one bearish note per day, Goldman has upped the ante to two (or more).
Following yesterday’s scathing attack on the ECB by Deutsche Bank, Goldman felt the urge to chime in as well parallel to the German bank’s accusations that Goldman’s former employee, Mario Draghi is set to destroy the Eurozone with his monetary lunacy, and in a note by Huw Pill, Goldman said that “as the ECB shifts from a passive, intermediation-driven form of balance sheet expansion towards a more pro-active QE-driven policy, concerns about the impact on financial stability will inevitably and rightly rise.”
Of course, Goldman couldn’t completely run over its former managing director – just imagine the Goldman-related “discovery” that a criminal probe would reveal – and so it tried to mitigate its sharp assessment, saying “yet the ultimate objective of these ‘active’ central bank balance sheet policies is to revive aggregate demand and boost nominal growth. If successful, the beneficial effects of the macroeconomic improvement on financial stability would more than outweigh the short-run and partial implications coming from incentivising greater risk-taking.”
Right. The only problem is that 8 years later, there has been no boost in aggregate demand, in fact just the opposite, not to mention a total collapse in DB stock as a result of NIRP crushing the NIM carry trade, which is why so many banks and pension funds are now furious at the ECB.
However, it wasn’t just the ECB that Goldman took issues with. In a separate note by Goldman’s HY analysts, the firm announced that it has boost its 2016 default forecast by nearly a quarter, from 17% to 21%, and now expects a substantially greater amount of debt – mostly high yield – to default this year.
Here is Goldman’s math:

This post was published at Zero Hedge by Tyler Durden – Jun 9, 2016.

China Bond-Sale Cancellations Soar As BofA Warns “Default Risk Is Mispriced”

While BofA’s base-case calls for “no crisis,” the soaring levels of bond-sale cancellations hitting the non-government credit markets is starting to make Asia strategist David Cui nervous…
Year-to-date, 241 non-government bond issuances had been cancelled or postponed; 120 so far in April alone, vs. 315 in total in 2015 (Chart 1). At this stage, the situation appears manageable – in April month-to-day, issuers successfully sold 709 bonds (worth Rmb1.04tr), so the success rate is still above 85%. That said, if, contrary to our expectation, the bond market indeed corrects sharply, finances of developers, banks, brokers, industrials and utilities may suffer disproportionally, by our assessment, because they are highly geared and they have heavily relied on bonds recently.
Bond default risk is mispriced: A perceived implicit government guarantee on bonds and other moral hazards in the shadow banking sector, including wealth management products, is largely behind the mispricing, in our view. There also appears to be noticeable bond-rating inflation, in our opinion.

This post was published at Zero Hedge on 04/28/2016.

$14 Billion In Junk Bond Defaults Push April Total To Highest Since 2014

Following yesterday’s bankruptcy of Peabody Energy and today’s Chapter 11 filing of XXI Energy, defaults among American junk bonds just topped $14 billion in April, the highest monthly volume in two years according to Fitch calculations, and that is only for the first two weeks.
April’s surge in bankruptcy filings is not unexpected: according to JPM’s default tracker, the number of bankruptcies was on a tear in both the month of March and the first quarter.
In the past month alone seven companies defaulted totaling $16.4bn, including $12.3bn in high-yield bonds and $4.1bn in leveraged loans. This marked the third highest monthly volume since the last default cycle, trailing only April 2014’s $39.5bn (TXU) and December 2014’s $18.3bn (CZR). With two weeks left in the month, April may well surpass March.

This post was published at Zero Hedge on 04/14/2016.

04.11.16: Economic Collapse Update / Bond defaults rising

The following video was published by Paul Sandhu on Apr 11, 2016
Deutsche Bank Says World “Past The Point Of No Return” In The Default Cycle
Over the past year, the credit cycle finally turned, and has unleashed the latest default cycle. In fact, as BofA’s Michael Contopoulos warned last week, it may be the worst default cycle in history with “cumulative losses over the length of the entire cycle could be worse than we’ve ever seen before.”

Deutsche Bank Says World “Past The Point Of No Return” In The Default Cycle

Over the past year, the credit cycle finally turned, and has unleashed the latest default cycle. In fact, as BofA’s Michael Contopoulos warned last week, it may be the worst default cycle in history with“cumulative losses over the length of the entire cycle could be worse than we’ve ever seen before.”
Over the weekend, the FT got the memo with a report that “global company bond defaults at highest level since 2009” in which it said that “the global bond default rate by companies is running at its highest since 2009 with the US accounting for the vast majority, according to rating agency Standard & Poor’s. A further four defaults this week, with three coming from the troubled oil and gas sector, pushed the overall tally to 40 with a little over a quarter of 2016 done.”
To be sure, the US default cycle is bad and getting worse. But how much worse?
The latest to attempt that answer is DB’s Jim Reid who in his just released 18th annual default study explains why his “late cycle fears continue to build.” These are some of the highlights:
There are clear signs the cycle is turning, especially in the US. Our US strategists have previously suggested that we need the combination of three conditions for us to be confident the next default cycle is imminent. We need the accumulation of excessive debt and preferably of deteriorating quality, some kind of external shock/trigger and tighter monetary policy/a flattening of the yield curve. The pieces of the jigsaw are building. US corporate debt accumulation now compares with that seen prior to previous default cycles. Equity volatility has seen two spikes in the last 12 months (August and early 2016), bank equity is falling (a lead indicator of lending?) and global yield curves continue to flatten.

This post was published at Zero Hedge on 04/11/2016.

Clueless in Davos

Making their annual pilgrimage to the exclusive Swiss ski sanctuary of Davos last week, the world’s political and financial elite once again gathered without having had the slightest idea of what was going on in the outside world. It appears that few of the attendees, if any, had any advance warning that 2016 would dawn with a global financial meltdown. The Dow Jones Industrials posted the worst 10 day start to a calendar year ever, and as of the market close of January 25, the Index is down almost 9% year-to-date, putting it squarely on track for the worst January ever. But now that the trouble that few of the international power posse had foreseen has descended, the ideas on how to deal with the crisis were harder to find in Davos than an $8.99 all-you-can-eat lunch buffet, with a free cocktail.
The dominant theme at last year’s Davos conference, in fact the widely held belief up to just a few weeks ago, was that thanks to the strength of the American economy the world would finally shed the lingering effects of the 2008 financial crisis. Instead, it looks like we are heading straight back into a recession. While most economists have been fixated on the supposed strength of the U. S. labor market (evidenced by the low headline unemployment rate), the real symptoms of gathering recession are easy to see: plunging stock prices and decreased corporate revenues, bond defaults in the energy sector and widening spreads across the credit spectrum, rising business inventories, steep falls in industrial production, tepid consumer spending, a deep freeze of business investments and, of course, panic in China. The bigger question is why this is all happening now and what should be done to stop it.
As for the cause of the turmoil, fingers are solidly pointing at China and its slowing economy (with very little explanation as to why the world’s second largest economy has just now come off the rails). And since everyone knows that Beijing’s policymakers do not take advice from the Western financial establishment, the only solutions that the Davos elite can suggest is more stimulus from those central banks that do listen.

This post was published at Euro Pac on January 26, 2016.

The Dominoes Keep Falling: Leftward Lurches And EM Defaults

Sometimes one big event dominates the landscape, like last week when the Fed raised interest rates. Other times a bunch of less-universally-significant-things add up to a meaningful story. And the story that follows here is, of course (given the venue), ominous.
First up is the much-discussed US$9 trillion that developing countries borrowed back when the dollar was weak and their currencies were relatively strong. Pundits have been warning that with the dollar soaring this debt was largely underwater and therefore a threat. But as far as anyone could tell it wasn’t blowing anything up.
Then on Friday a big Mexican construction company defaulted:
CA Skips Debt Payment as $1.35 Billion Bond Default Looms
(Bloomberg) – Empresas ICA SAB will skip a debt payment due by the end of the month as Mexico’s biggest construction company heads for the nation’s biggest default in at least two decades. Stocks and bonds declined.

This post was published at DollarCollapse on December 21, 2015.

Dollar-Debt Blows up in Mexico, Pushes Biggest Construction Firm toward Abyss

The oil connection. By Don Quijones, Spain & Mexico, editor at WOLF STREET. After weeks of false promises, rampant speculation, and furious denials, Mexico’s biggest construction company, ICA, finally admitted that it will not pay the $31 million in interest outstanding on $700 million worth of bonds. The company’s shares plunged 24% to 3.93 pesos on the news, its biggest one-day rout since 1999.
‘ICA has made this decision in order [to] preserve liquidity, prioritize ongoing operations, and fund projects currently under development,’ the firm said in a press release. ‘Over the next 30 to 60 days, with the help of its financial advisors, Rothschild and FTI Consulting, ICA will work on a cost-cutting and restructuring plan.’
If ICA fails to make payments on all of its $1.35 billion in overseas notes, it will become the biggest corporate bond defaulter in Mexico since Moody’s Investors Service began tracking the data in 1995, just after the eruption of Mexico’s Tequila Crisis.

This post was published at Wolf Street by Don Quijones ‘ December 19, 2015.

American Exceptionalism: Endless War, Parasitic Financialisation, Wage Stagnation, and Oligarchy

‘The financial system itself continues to exhibit dangerous and erratic behavior; the stock market is rigged and Wall Street is a parasitic wealth transfer operation; commodity prices plummet; junk bond defaults double; derivative exposures remain in the dark; community banks are gobbled up; and the holdings of the mega Wall Street banks become ever more concentrated, with just six banks now controlling over 90% of derivatives and 40% of deposits.’
Wall Street On Parade
There will be the usual movement to ‘blame the victims’ in this, the ‘gullible’ American people who do not wish to face the facts. This is how it always goes, and it works because it is easy to despise the other guy, or just hate ‘the other.’
Most people are busy and working hard to make ends meet. They obtain their view of things from ‘the news media’ for the most part.
When was the last time you saw any rational discussion of any of these charts in a newspaper or on television news program?
And if the ever did present such a chart, it would be to show it and then have a ‘strategist’ from the Democratics and a ‘strategist’ from the Republicans argue about it, relying heavily on spin, emotion, and rhetoric, perhaps backed up with some ‘paid for’ studies funded by oligarchs and their think tanks.
The American people are being fed a steady stream of lies and half-truths from a captive media, and for the most part the privileged achievers keep silent to protect their own interests, to ‘go along to get along.’ They rationalize this by burying themselves in the details of their own professions.
If you hide the facts from people, and lie to them constantly to promote the interests of one or more of the powerful oligarchs and the moneyed interests, how can you blame the people for falling for the lies? Where is the truth to be heard?

This post was published at Jesses Crossroads Cafe on 10 DECEMBER 2015.

Distrust Fuels Outrage at House Financial Services Committee

Paranoia is rampant among Republicans on the House Financial Services Committee and was on display throughout its hearing yesterday. Unfortunately for the nation, much of that paranoia is well founded.
Just take a look at the photo above. The panel of witnesses that testified yesterday represent just eight of the ten voting members of the Financial Stability Oversight Council (FSOC; which is pronounced F-Sock), another layer of oversight imposed by the Dodd-Frank financial reform legislation of 2010 to monitor an ever sprawling octopus of a financial system that looks to most Americans as if it is still out of control, seven long years after the greatest financial collapse since the Great Depression.
Behind each of the regulators on the panel (see list and testimony below), with the exception of S. Roy Woodall, the independent member of FSOC with insurance expertise, there is a regulatory agency eating up more and more taxpayers’ dollars while the financial system itself continues to exhibit dangerous and erratic behavior; books continue to be published showing the stock market is rigged and Wall Street is a parasitic wealth transfer operation; commodity prices plummet; junk bond defaults double year over year; derivative exposures remain in the dark; community banks continue to go out of business or are gobbled up; and the holdings of the mega Wall Street banks become ever more concentrated, with just six banks now controlling over 90 percent of derivatives (still housed on the books of their insured, taxpayer-backstopped commercial bank) and 40 percent of deposits.

This post was published at Wall Street On Parade on December 9, 2015.

Junk Bond Issuance Collapses, ‘Distress Ratio’ Spikes

Fitch Ratings is fretting about junk-bond defaults. ‘After five issuer defaults already this month accounting for nearly $2 billion in new volume,’ Fitch now expects that the default rate will hit 3.5% by year-end, up from 2.5% to 3% a few days ago. Through September, the trailing 12-month default rate was already 2.9%.
Worse: a 4% default rate by year end is ‘more likely’ than a 3% default rate. And it’s ‘set to rise further in 2016.’
In non-recessionary periods, the default rate averages 2%. During recessionary periods it averages 11%. That’s why recessions are terrifying for junk-bond holders. Junk bonds are called ‘junk’ for a reason.
We’re not there yet. But the energy and metals & mining sectors are getting there: in September, their default rates were 5% and 10% respectively. Fitch: ‘These sectors experienced three consecutive months with over $4 billion in defaults, a level not seen since 2009 when monthly volume in the entire market exceeded $4 billion for seven straight months.’
There is a period before default when investors are picking up on the troubles the company is having and demand higher yields in return for taking on the risks. Debt is considered ‘distressed,’ when the spread between its yield and the yield of US Treasuries surpasses 10 percentage points.

This post was published at Wolf Street by Wolf Richter ‘ October 12, 2015.