There’s a new recession canary in the coal mine, Morgan Stanley says

Bloomberg/Tracy Alloway/8-30-2022

“Move over bond spreads, there’s a new canary in the credit coal mine when it comes to showing the early signs of a looming recession. So says Morgan Stanley strategist Srikanth Sankaran in a new note. He points out that while junk-rated bonds have traditionally been the credit market’s first to crack as economic conditions deteriorate, that position may now be filled by the more than $1 trillion worth of floating-rate loans.”

USAGOLD note: This could be a serious problem, particularly when a recession is factored into the equation.

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