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The total amount of corporate bonds outstanding is now over $10 trillion, and the primary dealer inventory of corporate bonds is $33 billion, see chart below.
This is not a liquid market. When credit markets are quiet and calm, it gives the impression that liquidity is fine, but if many holders of credit suddenly want to sell, liquidity will disappear. Even in quiet markets, finding a bond can take several days.
With more evergreen funds with monthly and quarterly liquidity in private credit, the reality is that the liquidity situation in public and private credit is converging, and in some cases, if you want to buy or sell a big amount of public credit without moving the price, private credit may be more liquid.
Source: FRBNY, Haver Analytics, ICE BofA, Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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When the Fed lowered interest rates to zero in 2008, demand for $100 bills started growing faster than demand for $1 bills, and there are now more $100 bills than $1 bills in circulation, see chart below.
Source: Federal Reserve Board, Apollo Chief Economist See important disclaimers at the bottom of the page.
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See important disclaimers at the bottom of the page.
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Immigration continues to be the key source of population growth in the United States, and the CBO estimates that net births will be negative in a few decades, see chart below.
For more discussion, see also this new paper.
Source: The 2023 Long-Term Budget Outlook, CBO, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Fed hikes are increasingly impacting coverage ratios for highly leveraged companies, but the composition of coverage ratios remains similar to what we saw from 2012 to 2020, see chart below.
Source: Pitchbook LCD, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The Fed’s inflation target is 2%, and the bottom line of the inflation discussion is that inflation has started to move sideways at 3%, and this is a problem for the Fed, see chart below.
Source: BLS, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Container transportation prices are slowly coming down from their peaks, but IMF data shows that traffic volumes through the Suez Canal continue to deteriorate, see chart below.
Source: IMF, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Annuity sales are almost double their pre-pandemic levels because of higher interest rates. And strong annuity sales create strong demand for credit, see chart below.
Source: LIMRA, Bloomberg, Apollo Chief Economist. Note: 2023 estimates from LIMRA. See important disclaimers at the bottom of the page.
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The buyer base for US Treasuries has shifted from yield-insensitive buyers (sovereign wealth funds and central banks, including the Fed) to yield-sensitive buyers (US households, US pensions, US insurance), see chart below.
This may become a problem once the Fed begins to cut rates because that could mean less demand from the yield-sensitive buyers, ultimately resulting in a steeper yield curve.
Source: FFUNDS, Haver, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Canadian business insolvency filings have increased dramatically in recent months, see chart below.
Source: Office of the Superintendent of Bankruptcy, Apollo Chief Economist See important disclaimers at the bottom of the page.
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