Is It Too Quiet Out There?
It’s been an eerily quiet week. Barely any corporate news of note and really only one important story (regulatory reform). It may not mean much of anything. Summer typically ushers in a more tranquil period (though not the last two years) when it comes to news. But I do find myself wondering whether that quiet will last.
I’ve spent a good amount of time the last few weeks reporting on the incredible generosity of the capital markets. Whether investment grade or far from it, many corporations that could not raise capital previously have been happily able to sell debt and equity. This week was still reflective of that state of affairs. Look no further than the struggling company E-Trade’s ability to sell $435 million worth of stock (granted it was at $1.10 a share and its largest single shareholder bought $100 million worth) and you know what I’m talking about.
But amidst all that quiet this week, I hear the faint sound of a window that has been wide open, getting shut a bit.
During the week the indexes that follow junk bonds and highly leveraged loans began to lose ground for the first time in quite a while. It’s not that debt deals won’t keep getting done. But the calendar next week has plenty of deals awaiting pricing and I still believe we will get our share of headlines detailing bankruptcies at plenty of companies…..headlines that will serve to remind investors that it’s still not a picnic out there in the real world.
Will some companies start getting shut out of the market again? Will investors halt the large inflows of funds from low to higher risk assets? I don’t know the answer. But it is quiet out there, too quiet.
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