Bond Sales Tumble 90%, Junk Returns Go Negative

There are increasing signals the second leg of the double-dip is here. It is very likely we have seen the top for the stock market and gold for this phase of the down cycle. Take a look at what is going on in the credit markets (Via Bloomberg):

Investment-grade debt sales are drying up and returns on high-yield bonds have turned negative for the year as investors wait to see whether European leaders can contain Greece’s budget crisis.

Borrowers in the U.S. and Europe sold $5.96 billion of high-grade securities this week, the least this year and about 90 percent less than the average $52.9 billion, according to data compiled by Bloomberg. Speculative-grade, or junk, bonds in the U.S. have lost 0.09 percent in 2010 after gaining 1.52 percent in January, Bank of America Merrill Lynch index data show...

Corporate bonds have returned 1.39 percent this year, according to the Merrill index. Junk bonds lost 1.58 percent so far this month, the most in a year, the bank’s U.S. High Yield Master II Index shows...

Prices of high-yield loans fell for the fifth straight day. The S&P/LSTA U.S. Leveraged Loan 100 Index declined to 88.93, the lowest since Jan. 8 and down from 89.07 the day before. Leveraged loans and junk bonds are rated below Baa3 by Moody’s Investors Service and below BBB- by Standard & Poor’s.

Without the Fed printing money, there is just not enough funds available to support the current capital market structure. Everybody is grabbing at the money, the PIIGS, the junk bond issuers etc.