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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 399.29+0.9%Dec 17 4:00 PM EST
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To: RetiredNow who wrote (108051)12/11/2014 3:21:24 PM
From: John Vosilla  Read Replies (1) of 218545
 
The Fed Helped Cause $550 Billion Energy Debt Boom,

And Now It Could End In Tears. The danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt.

Since early 2010, energy producers have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank AG. With oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations. Research firm CreditSights Inc. predicts the default rate for energy junk bonds will double to eight percent next year.

More from Bloomberg.com: How America Is Kicking Its Oil Habit

"Anything that becomes a mania -- it ends badly," said Tim Gramatovich, who helps manage more than $800 million as chief investment officer of Santa Barbara, California-based Peritus Asset Management. "And this is a mania."

The Fed's decision to keep benchmark interest rates at record lows for six years has encouraged investors to funnel cash into speculative-grade securities to generate returns, raising concern that risks were being overlooked. A report from Moody's Investors Service this week found that investor protections in corporate debt are at an all-time low, while average yields on junk bonds were recently lower than what investment-grade companies were paying before the credit crisis.


finance.yahoo.com
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