Saturday, April 15, 2017

Global Debt Atlas

... here is a handy chart from Goldman which shows two things:

First: the full breakdown of notional amounts of some $36 trillion in global debt, from over $10 trillion in European sovereigns to a tiny sliver of European junk bonds, and covering the entire yield gamut, starting with US junk bonds at the top, and ending with the ECB's favorite European collateralized securities.

Second, and perhaps just as important: the deviation between current yields and the post-crisis median.

If, as many expect, we are about to see a mean reversion in credit metrics, then the chart below provides several distinct arbitrage opportunities as yields either spike or slump to their post-crisis averages, most notably in Europe and the UK, but also potentially in the US where short-end (1-3Yr USTs) yields may have no choice but to slide if and when the Fed admits the tightening experiment was a failure (see the Ghost of 1937), and things go back to abnormal.

I don't think this will help the average poor slob, but it's nice to know that the vampire squid keeps track of the various corpses on which it continues to feed.

Yes indeed, the love of money is the root of all evil.

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