High Yield Credit Spreads Are An Accident Waiting To Happen

Bond bulls need to defend now.

• Catching Up With Our Shorts In Consumer Lending & Private Credit Markets

• Now, Let’s Talk About The High Yield Credit Market

• First AI Disrupts Then War. Bond Market Can Crash From Oversold.

Catching Up With Our Shorts In Consumer Lending & Private Credit Markets

The AI-enabled macro ‘analysts’ have already taken hold of the investment grade private credit risk that has immerged this year and are pushing the panic button in headlines like “The Credit Market Is Collapsing”.

Clickbait annoys me. Not only is it not an investment thesis and LATE, but it only paints the picture in black-and-white and that is just not how the multi-colored and nuanced markets work.

I won’t lament about that or private credit. Lots of ink has been spilled elsewhere that is more granular and trustworthy - see Unicus Research and Leyla Kunimoto.

But before everyone else, we were blessed to have our very-own Classical Economist, GEOFFREY FOUVRY, set up the fundamental support for all those amazing CONSUMER LENDING SHORTS.

It was his early forensic accounting that was my inspiration behind the timely top calls in UPST, AFRM, SOFI…KKR, BX, APO… and long before they became popular ;0).

I started a CONSUMER LENDING WATCHLIST (Sept 30-Oct 9th). How we doin’?

Now, Let’s Talk About The High Yield Credit Market

Despite the geopolitical risks that have triggered higher oil, yields and dollar - pushing equities lower - bond traders and credit specialists stay largely bullish BECAUSE high yield credit spreads have remained tight (319bp).

So before they change their story, let’s parse out what I see.