Phorgy Phynance

Bad news from Countrywide

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My favorite blogger, Barry Ritholtz over at The Big Picture, has some great comments on Countrywide’s conference call earlier today.

Countrywide: “Home price depreciation at levels not seen since the Great Depression”

My inaugural post, “The End is Near“, seems to be not too far from the mark ;)

My premonition that high yield bond spread would widen by 200 bps seems to be not so crazy either.

High Yield Spreads Continue Higher

Here’s the article:

High yield spreads measure the difference between the yield on high yield corporate bonds (junk bonds) and US Treasuries. Traditionally, the size of the spread has been inversely correlated to the level of risk aversion among investors. When spreads are low, investors are paying little attention to risk, while high spreads indicate investors are more sensitive to risk.

As we noted last week, spreads in the junk bond market have been widening since the start of June. On June 1st, the spread bottomed at 241 basis points. Since then however, the spread has widened by over 100 basis points to 344, which represents an increase of 43%. Below we highlight the Merrill Lynch High Yield Corporate Bond Spread since 1997 and highlight other spikes in the index.

high_yield_credit_spreads.png

Wild times!

Remember, I’m an optimist :)

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Written by Eric

July 24, 2007 at 12:35 pm

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