Edward Casey

Fixed Income ∙ Corporate Credit ∙ Investment Grade ∙ High Yield ∙ Leveraged Loans ∙ CDS

[Edward Casey @ejc_usa]

A clear-eyed perspective on private credit.

[Alberto Gallo @macrocredit]

Private Credit: The Moment of Truth

https://t.co/zx1h2ZZLOn

[Edward Casey @ejc_usa]

Since 1936, an average of 37% of FOMC meetings have included at least one dissenting vote. Currently, Chairman Powell has recorded the lowest percentage since McCabe’s term from 1948 to 1951.

Our expectation is for a higher share of FOMC dissents going forward.

[Edward Casey @ejc_usa]

“There are decades where nothing happens; and there are weeks where decades happen.” Lenin

[Edward Casey @ejc_usa]

@nwtSwaps4CL @HayekAndKeynes https://t.co/CR08NLpgSt

[Edward Casey @ejc_usa]

I enjoyed the latest book by polymath Larry McDonald, @Convertbond, which provides a detailed review of the risks and opportunities in this new economic reality.

https://t.co/JxRi1yvcc8

[Edward Casey @ejc_usa]

"long and variable lags" of monetary policy tightening the prelude to "long and variable credit contraction" today.

[Edward Casey @ejc_usa]

The crisis of confidence unfolding in the banking system will tighten lending standards further. The price and availability of credit will become more costly. Recession probabilities will increase alongside fears of repeating the echo inflation waves of the 1970s and early 1980s.

[Edward Casey @ejc_usa]

Our analysis of the dozen US recessions since WW2 shows that real GDP declines by -2.2% on average. The severity of declines is the perspective that matters now.

[Edward Casey @ejc_usa]

Credit card balances up 15.2% to $986bln, the highest annual growth in 20 years. A record net 52.4mln credit inquiries last year, +46% higher than 2021. Credit card delinquencies have started to tick higher, albeit from extremely low levels.

https://t.co/J6xv459RsK

[Edward Casey @ejc_usa]

@macro_daily @lighthousejerry Competition from private debt markets likely a factor. Also, hung bridge loans probably negatively influenced bank officer sentiment in Q4.

[Edward Casey @ejc_usa]

Bank C&I lending standards coincide with corporate spread changes and lead the default rate. Q4 levels have entered the zone of prior downturns.

https://t.co/sTMZPbKpuh

[Edward Casey @ejc_usa]

@lighthousejerry @macro_daily The change in credit spreads and lending standards will likely converge. Top of my list of charts to watch this year.

[Edward Casey @ejc_usa]

@gnesi_max if you lag C&I loan growth by 18 months (inverted scale), it has historically followed lending standards.

[Edward Casey @ejc_usa]

The year-over-year change in high yield credit spreads tend to shadow this index of leading economic indicators.

[Edward Casey @ejc_usa]

October recorded the eighth consecutive monthly decline for the Conference Board's composite index of leading economic indicators, which is rare to see outside of a recession. The Conference Board believes a recession is likely before year-end and continue through mid-2023.

[Edward Casey @ejc_usa]

With the Fed’s creditability on the line, our view is they are hell-bent on getting core PCE inflation back to 2% handle, even if it requires putting the economy into recession next year.

[Edward Casey @ejc_usa]

Powell “..if we were to over-tighten, we could then use our tools strongly to support the economy, whereas if we don't get inflation under control because we don't tighten enough, now we're in a situation where inflation will become entrenched and the costs will be much higher”

[Edward Casey @ejc_usa]

The Federal Reserve Bank of Cleveland’s Inflation Nowcasting model estimates a monthly gain of +0.28% in October and +0.41% in November in Core PCE.

https://t.co/eoFHpFoppX