Leveraged loan investors are heading for the door. Loans have their place in investment portfolios, but as late cycle assets to hold, these are not great. The Wall Street Journal's Sam Goldfarb calls them the "last domino to fall," in debt markets. He writes: While mutual funds represent just one source of demand for loans, the recent outflows have had a big market impact, leading to sharp declines in the prices of existing loans and prompting more investor-friendly terms on a shrinking supply of new loans entering the market. To some extent, loans—often referred to on Wall Street as … [Read more...]

Investors who purchased catastrophe bonds from PG&E now have the fate of their investments lying in the hands of investigators searching for the cause of the Camp Fire in California. If PG&E is found to be at fault for the fire, those investors are likely to lose everything. Markets will surely have to reevaluate the risk posed by such catastrophe bonds, and adjust yields demanded accordingly. Nicole Friedman reports on the bonds in The Wall Street Journal, writing: Those who follow the catastrophe-bond market are already anticipating the worst. The PG&E wildfire bond was quoted … [Read more...]

It’s time for investors to focus on Treasuries. As stocks tumbled 3% yesterday, Sinead Carew wrote at Reuters: NEW YORK (Reuters) - U.S. stocks tumbled on Wednesday, with the S&P 500 marking its biggest daily decline since Feb. 8, and technology stocks led the losses as rising U.S. Treasury yields sent investors fleeing from risky assets. The Dow Jones Industrial Average .DJI fell 831.83 points, or 3.15 percent, and the Nasdaq Composite .IXICdropped 315.97 points, or 4.08 percent, to 7,422.05. Read more here. … [Read more...]

James Mackintosh, writing in The Wall Street Journal, explains that as the term premium rises on bonds, hardest hit could be the so-called "acronym stocks," also known as the FAANGs. With rates on Treasuries rising, the discounted future profits of these tech giants look less attractive to investors. Mackintosh gives investors in the FAANGs three reasons to worry, writing: There are three reasons to worry. The first is that the acronym stocks— Facebook, Amazon, Apple, Google parent Alphabet, Netflix, Microsoft and others arranged into the FANGs, FAAMGs and so on—flew too high, and will now … [Read more...]

For years tech companies with vast overseas cash reserves have invested their wealth in the short-term debt of other corporations. But now that Apple and other companies are taking advantage of tax reform to bring home cash held abroad, the demand for that short-term corporate debt is drying up. Bloomberg's Molly Smith reports: Once the biggest buyers of short-dated corporate debt, Apple along with 20 other cash-rich companies including Microsoft Corp. and Oracle Corp. have turned into sellers. While they once bought $25 billion of debt per quarter, they’re now selling in $50 billion clips, … [Read more...]