Over the summer, rising rates threatened to drain liquidity and easy money from the financial markets. Now, as the year ends, economists are fixated on the horrible US housing market and debating whether the economic landing will be hard or soft.
It’s all bad news for credit... and yet.
And yet, credit spreads have ground in all year. Why? Because most investment-grade corporates are in very rude financial health. Profits are strong, spending on capex or M&A has not risen at an alarming rate, cash and liquidity is high. Investors and lenders want to put on assets.
So it is important to remember, though, that the day of reckoning has not been averted: it has merely been delayed. Even though shorting credit this year has generally been a costly mistake, with spreads now...
