Corporate Bonds Forecasting Major Recession

John Lonski from Moody's Capital discusses how the fall in corporate bonds is anticipating the most severe recession in the US economy since the great depression.  He mentions that yield spreads over treasury reaching record highs for junk bonds.  On investment grade debt, spreads went to their highest level since 1932. 

He is keeping his eye on LIBOR and wants to see this interest rate slide dramatically to signal a thawing out of the credit market.  Many private sector loans, mortgage loans, and other consumer loans are keyed off of LIBOR and this rate has jumped nearly 2% higher, rendering variable rate debt more expensive and furthering the problems in the economy. 


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