Fed Joining in Alarm Over Distortion It Enabled: Credit Markets
A Federal Reserve governor is joining those warning that junk-debt investors are poised for losses, while his institutionâ€™s policies spur them to keep buying the debt.
Yields on a record 38 percent of the $1.1 trillion of notes sold by the neediest U.S. borrowers wereÂ trading below the 10- year average rate forÂ investment-grade debentures last month, Barclays Plc data show. Investors poured a record $1.3 billion into U.S. leveraged loanÂ funds last week as covenants on the debt weaken the most ever.
The central bankâ€™s policy of keeping benchmark borrowing costs at about zero for a fifth year is pushing investors into riskier debt, even as Fed GovernorÂ Jeremy Stein warns that the market for speculative-grade debt may be overheating. While U.S. prosecutors are suing Standard & Poorâ€™s for deliberately failing to provide warnings against losses on collateralized debt obligations before the credit crisis, the governmentâ€™s stimulus is fueling demand for similar products now.
â€œNo matter how loud the chorus gets that this is crazy, the bulls are going to continue to run because thereâ€™s nowhere else to put money in fixed income,â€ saidÂ David Tawil, the co- founder of Maglan Capital LP, a distressed-debt hedge fund that manages about $50 million. â€œIf Iâ€™m saying now that the deals are getting laughable, if things donâ€™t change, six months from now the deals are going to be stupid.â€
Banks could be walloped by a burstingÂ bond bubble, cautions Federal Reserve Governor Jeremy Stein.
Read more atÂ http://investmentwatchblog.com/warning-even-the-federal-reserves-own-governors-are-warning-its-policies-could-be-creating-a-disaster-banks-and-investors-are-poised-for-losses-this-is-absolutely-ridiculous/#vljegJk1AZxYuqbT.99
Fedâ€™s Stein: Banks Could Be Smacked by Bursting Bond Bubble
Read Latest Breaking News from Newsmax.comÂ http://www.moneynews.com/FinanceNews/Stein-bond-bubble-bursting/2013/02/13/id/490243#ixzz2Ksescoje
This certainly sounds like a road to disaster, another expert telling the FEDS we are basically in real trouble with the Kings tactics.
The covering up of our true financial status is only to fool the people just as they did over the holidays making it sound like consumer spending was up etc. Â The only reason the Government made sure we heard that is so they could get people out there to spend, spend and spend. Â In the mean time they were preying on us and our taxes using that money in anyway they could and put it towards what ever debts they have been sinking in.
More and more we are at risk at losing ss, welfare what about those decades some people have worked all the while the Feds were taking money at of your paycheck just so you could be told you aren't getting SS, they only keep raising the age hoping the majority will be dead by the time it comes to pay out .
Those who already get it, it probably isn't going to match the living standards in the up coming months as things sky rocket into price.