The next financial crisis?
Posted by Charles II on December 2, 2015
Ciara Linnane, Marketwatch:
The oil and gas and metals and mining sectors are facing a spike in defaults and downgrades in 2016 and investors that have piled into their bonds in the hunt for yield are facing major losses, Moody’s warned Wednesday.
Companies in those two sectors have issued nearly $2 trillion in bonds globally since 2010, according to the rating agency, many of them in the high-yield — or “junk bond” — category. Now prices of a range of commodities, from oil, to copper, iron ore, gold and coal are at multiyear lows, battered by weak demand and oversupply.
“The sheer volume of commodity-related debt poses challenges because it means that credit losses from commodity investments will be substantial for many investors,” said Mariarosa Verde, Moody’s group credit officer and lead author of a report published Wednesday on the credit hazard posed by the current stress in commodity markets.
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