What Changed? | This Week's Briefing: Credit stress is no longer a theory. It is moving from "refinancing risk" into realized outcomes—defaults, liability management exercises, and restructurings that quietly reset recovery expectations. | The twist is that this is happening even with credit spreads still relatively calm. The weakest balance sheets are breaking first, while the broader market keeps pricing a soft landing. That gap is where most investors get surprised. | The lag matters. Rate hikes don't usually show up as losses on day one; they show up when floating-rate interest bills reset, hedges roll off, and maturities stop being "next year's problem." With policy still restrictive, the credit cycle is starting to surface in the places where cash flow is thin and capital structures are layered. | | A David Among Goliaths in the Lithium Gold Rush | | Energy giants like Exxon and Chevron have been buying up land in America's lithium hotspot. | Now they've got a new neighbor. | EnergyX just acquired 35,000 gross acres of high-grade lithium resources in Arkansas' Smackover Formation, right next to Exxon and Chevron's projects. | What's really turning heads about this move is that EnergyX isn't just competing for lithium-rich land. Their patented technology can recover up to 3X more lithium than traditional methods. That combination positions EnergyX to be one of the biggest lithium producers in America. Plus, General Motors has already invested along with other global leaders like Eni and POSCO. | Great timing too, because the demand for lithium is projected to 18X current production by 2040. | You can claim a stake in the lithium boom too. Join 40,000+ people as an early-stage EnergyX investor today. | *Disclaimer: This is a paid advertisement for EnergyX's Regulation A+ Offering. Please read the offering circular at invest.energyx.com. Under Regulation A+, a company has the ability to change its share price by up to 20%, without requalifying the offering with the SEC. | | The Numbers | The Fed's target range upper limit is 3.75% as of January 27, 2026. The ICE BofA U.S. High Yield option-adjusted spread is about 2.69% (still tight by historical standards). U.S. bankruptcies reached 749 in 2025 through December 14, up from 688 in all of 2024 (S&P Global Market Intelligence). Distressed exchanges were roughly 55% of global corporate defaults in 2025 (S&P Global Ratings). Fitch expects 2026 default rates to look similar to 2025: 4.5%–5.0% for leveraged loans and 2.5%–3.0% for high yield. Moody's long-run work shows discounted ultimate recoveries average about 38% for senior unsecured bonds—an important anchor when restructurings rise.
| | Why It Matters | Default cycles rarely arrive as one clean wave. They arrive as a series of "small" events—amend-and-extends, maturity pushes, payment toggles, and distressed exchanges—that transfer value across the capital stack. When those deals become the dominant form of default, it tells you lenders are negotiating around a solvency problem, not just a liquidity hiccup. | Sector hotspots tend to be familiar: capital-intensive businesses with uneven pricing power and high leverage. Think parts of consumer discretionary, healthcare services, telecom/cable, and pockets of rate-sensitive real estate and sponsor-backed balance sheets. Private credit adds another wrinkle because so much of it is floating-rate; lower policy rates can help at the margin, but opaque terms and weaker documentation can make recoveries less predictable when workouts begin. | Portfolio-wise, the message is straightforward: in a "higher-for-longer" world, credit selection matters more than duration calls. The market can keep spreads tight while default dispersion widens underneath. | | Takeaway | The early phase of a default cycle is not about panic—it's about hierarchy. The weakest borrowers reprice first, restructurings rewrite the rules on recovery, and the rest of the market learns (slowly) that time was the real subsidy. | — Lauren
Editor, American Ledger | Resources | Federal Reserve Bank of St. Louis (FRED), January 2026
https://fred.stlouisfed.org/series/DFEDTARU | Federal Reserve Bank of St. Louis (FRED), January 2026
https://fred.stlouisfed.org/series/BAMLH0A0HYM2 | S&P Global Market Intelligence, January 2026
https://www.spglobal.com/market-intelligence/en/news-insights/articles/2026/1/us-bankruptcy-filings-drop-for-private-equity-backed-companies-in-2025-96404421 | Fitch Ratings, January 2026
https://www.fitchratings.com/research/corporate-finance/2025-default-rates-ease-vs-2024-for-us-high-yield-leveraged-loans-16-01-2026 | Moody's Investors Service, (PDF) accessed January 2026
https://www.moodys.com/sites/products/defaultresearch/2006600000428092.pdf |
|
No comments:
Post a Comment
Keep a civil tongue.