Darda says it’s entirely possible that companies who need credit the most might not be able to get it.
That's because corporate bonds are being issued at the weakest pace in a decade and it's been three weeks since a high-yield corporate bond, or junk bond, has been issued. The drought is partially due to companies sitting on the sidelines waiting for conditions to improve however, it's also because there are not enough buyers.
Why is that a problem? When companies can't get funding from the markets, they have to draw down their credit facilities with their banks — which often forces the banks to hike their borrowing rates.
As the economy weakens, the companies that are going to need funding the most desperately are the ones further down the credit quality ladder.
So what’s the bottom line? “There is improvement out there but there’s a long way to go,” Darda says.
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