It’s often said that problems start at the periphery and work their way back to the core. With sub-prime auto defaults and delinquencies rapidly rising we find that the leveraged bank loan space is also seeing its distress ratio spike and mauling bank profits in the process. Currently the distress ratio is higher than that seen just after Lehman’s Brothers bankruptcy as it hit 12.96 in February. Additionally the rapid increase since the 1.06 seen in June 2015 is reminiscent of the dramatic spike in this series witnessed in late 2007 early 2008 as the 2008-2009 financial crisis got underway.
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