Displaying items by tag: deleveraging

(New York)

Stock markets have been taking a beating lately. Between worries over trade and rising rates, as well as the fading effects of tax cuts and the prospects of weaker earnings, stocks have been getting hammered. Now there could be another material blow coming: corporate deleveraging. For years, companies have gorged on debt to fund buybacks and dividends. However, as rates a rising, they are now under pressure to deleverage, and there will be increasing plans for paying down debt. All of that means companies will be spending less in equity markets and on growth.

FINSUM: This is bad news. Stock buybacks have been one of the main drivers of returns the last few years, and the evaporation of that stimulus will add pressure.

(New York)

Those who only pay causal attention to muni bonds might be scared away from the market by negative stories about big buildups in debt, bankruptcies, and a general erosion in credit quality. However, this year, nothing could be further from the truth. There has been a massive deleveraging of the sector in 2018, with total US muni bond issuance down a whopping 17% to-date, and on pace for 25% by the end of the year. The dearth of issuance has pushed yields down and prices up. “It’s a seller’s market”, says one muni bond analyst.

FINSUM: Part of the lack of new issuance is due to the federal tax changes, but nonetheless, the market is looking increasingly healthy.