As does Bloomberg senior credit analyst James Crombie:
“The spread-widening, downgrade, default and distress cycle feels similar to 2008, but we’ve never seen the U.S. economy shut down for a protracted period. If it stays closed through May the hit to businesses will be significant. If it’s a lot longer in places like New York City, where infection rates are jumping, bond issuers likely get hammered.
Consumers who’ve been furloughed aren’t likely to flock to debt-heavy sectors like travel, leisure, gaming or retail in any hurry –- even if they’ve got over the horror of being in crowded spaces. Add to that the shock of $20 oil and it’s hard to see credit coming roaring back.
Borrowers get it. High-grade companies are issuing at record size whenever they can regardless of cost, knowing that funding gets more expensive as risk rises, and the junk market also just reopened.
Investors with cash want to believe in a robust rebound. In isolation, there probably are scattered opportunities to buy fundamentally-solid bonds that were jettisoned by those who needed cash when the markets tumbled. In aggregate though, credit markets are fraught with risks that still can’t be quantified.”