{"id":44225,"date":"2019-03-05T17:27:51","date_gmt":"2019-03-05T22:27:51","guid":{"rendered":"https:\/\/olduvai.ca\/?p=44225"},"modified":"2019-03-05T17:27:54","modified_gmt":"2019-03-05T22:27:54","slug":"bis-warns-of-market-crash-risk-looming-firesales-once-bbb-downgrade-avalanche-begins","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=44225","title":{"rendered":"BIS Warns Of Market Crash Risk, Looming Firesales Once BBB Downgrade Avalanche Begins"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><a href=\"https:\/\/www.zerohedge.com\/news\/2019-03-05\/bis-warns-market-crash-risk-looming-fire-sales-over-mass-bbb-downgrades\">BIS Warns Of Market Crash Risk, Looming Firesales Once BBB Downgrade Avalanche Begins<\/a><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Over the past year, one of the key concerns to emerge in the $6.4 trillion investment grade corporate bond market is when and how will BBB-rated bonds, which now comprise 60% of all outstanding IG names in the US, be downgraded and whether a new financial crisis will follow<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com\/s3fs-public\/inline-images\/bbb%20as%20a%20percentage%20of%20total.jpg\" alt=\"\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">We addressed this issue most recently in &#8220;<a href=\"https:\/\/www.zerohedge.com\/news\/2018-11-22\/64-trillion-question-how-many-bbb-bonds-are-about-be-downgraded\">The $6.4 Trillion Question: How Many BBB Bonds Are About To Be Downgraded<\/a>&#8221; while the broader question of the &#8220;next bond crisis&#8221; was address in &#8220;<a href=\"https:\/\/www.zerohedge.com\/news\/2018-10-07\/next-bond-crisis-over-1-trillion-bonds-risk-cut-junk-once-cycle-turns\">Over $1 Trillion In Bonds Risk Cut To Junk Once Cycle Turns.<\/a>&#8221; It wasn&#8217;t just us, however, with financial luminaries, regulators and investors such as the&nbsp;<a href=\"https:\/\/www.zerohedge.com\/news\/2018-11-16\/imf-sounds-alarm-leveraged-lending\">Fed, the BOE, the IMF, Oaktree&#8217;s Howard Marks, Doubleline&#8217;s Jeff Gundlach, JPMorgan, and Guggenheim&nbsp;<\/a>all warning that the &#8220;fallen angel&#8221; threat is arguably the most serious challenge facing the US corporate bond market during the next recession.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com\/s3fs-public\/inline-images\/IG%20BBB%20morgan%20stanley.jpg\" alt=\"\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.zerohedge.com\/sites\/default\/files\/inline-images\/IG%20BBB%20morgan%20stanley.jpg?itok=8YKKp_2C\"><\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And now, it&#8217;s the turn of the central banks&#8217; central bank, the Bank of International Settlements, to join the bandwagon, warning that the surging supply of corporate debt in the riskiest, BBB investment-grade category has left markets vulnerable to a crash once economic weakness triggers a bout of rating downgrades, and sends over $1 trillion in IG bonds, or fallen angels, right into junk bond purgatory.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com\/s3fs-public\/inline-images\/BBB%20par%20vs%20HY%20par.jpg\" alt=\"\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.zerohedge.com\/sites\/default\/files\/inline-images\/BBB%20par%20vs%20HY%20par.jpg?itok=D19lOmkC\"><\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Highlighting numbers which have been discussed previously, the BIS notes that in 2018, BBB-rated bonds accounted for about 45% of U.S. and European mutual fund portfolios, up from only 20% in 2010, according to the BIS, and cautions that due to rating trigger limitations, many investors may have to sell those bonds if they fall out of the investment-grade scale.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp;\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"<p>BIS Warns Of Market Crash Risk, Looming Firesales Once BBB Downgrade Avalanche Begins Over the past year, one of the key concerns to emerge in the $6.4 trillion investment grade corporate bond market is when and how will BBB-rated bonds, which now comprise 60% of all outstanding IG names in the US, be downgraded and [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[1733,1269,24552,24551],"class_list":["post-44225","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-for-international-settlements","tag-bis","tag-corporate-bond-market","tag-market-crash-risk"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/44225","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=44225"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/44225\/revisions"}],"predecessor-version":[{"id":44226,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/44225\/revisions\/44226"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=44225"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=44225"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=44225"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}