A Great Barometer of an Economy’s Credit Health Is High Yield Bond Issuance

We Expect High Yield Credit Issuance To Decline as Default Risk Increases

If an economy absorbs new paper issued by high yield companies, that is a good sign all else held equal. I am surprised that credit spreads have not widened yet, which suggests that investors are sanguine about credit risk. I am not so sanguine (look at BofA’s numbers as well as industry data around auto, home and credit card loan delinquency).

North American High Yield issuance declined in Q2 to $61.5 billion from $69.3 billion in Q1 (see chart below). I would expect a downward trend to ensue through the early part of next year.