The Fed is catalyzing a similar degree of Destructive Inequality across credit markets. Last week Ball Corp. (BLL) priced $1.3bn of 10yr notes at a record low yield of 2.875% – the lowest-ever for a US junk bond with a maturity of five years or longer. That contributed to a record $1.9tn YTD borrowing binge by large US corporations, with IG firms raising $1.3tn, HY firms raising $274bn, and $270bn priced into the leveraged loans market.
Contrast that with the Fed’s $600bn Main Street Lending Program, which has issued just $253mil of loans through August 10th. Yikes. As the Chart of the Day below highlights, the ongoing tightening in the bank credit market is something we continue to anticipate will counter the Fed’s Trickle-Down Economics with some good ol’ fashioned Trickle-Up Insolvency. Per PE Powell, the aforementioned Credit Cycle divergences are “not really related to monetary policy”… Yeah, right.