Concerns about the credit markets were exacerbated by a JPMorgan report that said sales of collateralised debt obligations – complex debt instruments that have helped fuel the global credit boom – have plummeted from $50.6bn in June. As of July 20, there had been $19.9bn in sales of CDOs, which pool loans and bonds into securities. Since then there have been no new deals. The diminishing demand for CDOs is raising fears that banks will be left with debt that has been used to finance leveraged buy-outs, affecting their appetite for future deals.
It is not clear if this just takes some of the steam out of the private equity market or becomes a more pronounced drying up of credit. Given the flow of finance from central banks in Asia and energy-producing countries, the softer landing still seems the more likely for now.
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