Fresh pessimism sweeps over credit sector

Credit market indicators – barometers of stress since the financial crisis began 18 months ago – are once more flashing red.

Heightened concern over the fate of US carmakers and worries about escalating losses at banks and financial institutions and at General Electric, the largest debt issuer in capital markets, are creating a grim mood.

“There has been a strong repricing of credit risk as there is a panic almost about the financial sector,” Brian Yelvington, strategist at Creditsights, says.

“So far, most of the pain of the problems at financial institutions is being taken by shareholders and taxpayers, but there are real concerns that the problems will be so large that the pain will shift to holders of bonds and other securities.”

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