Monday, May 24, 2010

Corporate Bond Sales Fail; Worst in a Decade

Companies have issued $47 billion of debt in May, down from $183 billion in April and the least since December 1999, data compiled by Bloomberg show.

“This is a quintessential liquidity crisis,” said William Cunningham, head of credit strategies and fixed-income research at Boston-based State Street Corp.’s investment unit,told Bloomberg. “It’s not inconceivable to imagine a situation where the markets behave so poorly, the liquidity behaves so badly, and risk-tolerance just evaporates that -- particularly in Europe -- consumers contract, businesses stop hiring and stop investing, and economic activity halts.”

Bottom line, with the Fed and the ECB not printing any money, the restructuring of the debt markets continue. The government debt crisis being the most obvious situation, but the restructuring is much bigger than the even the gigantic government crisis. Until the Fed changes its stance, as I expect it will at some future crisis point, cash will be king.

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