JP Morgan Global Fixed Income head Bob Michele makes some sober statements in this 7-minute Bloomberg interview. Worth a listen. Here is a direct audio link.
His team’s base case scenario sees the economic shutdown lasting nine months and U.S. unemployment peaking at 20%, only moving down to 9% by the end of 2021 (compared to unemployment that peaked at 10% in the 2008 recession). He also notes that the Fed is buying just 10% of high yield debt and this won’t prevent a rise in default rates for “a prolonged period of time.”
A couple of his quotes particularly resonate:
“The market’s got to start to realize that just because there is access to lending and borrowing doesn’t mean companies will take on another turn of leverage. At some point, they’ll realize they can’t service it.
…This feels to me like the second quarter of 2008, where the first quarter was horrible. There were policy responses and the market immediately became optimistic, and then the horror of what actually happened starts to hit in the data.”
Roger that.
;
