12/20/2014 - Financial Repression: Energy Company Debt Fallout from Federal Reserve Financial Repression Policies
Bloomberg reports on the unfolding fallout now happening in energy-company debt as a result of Federal Reserve financial repression policies of zero interest rates & stimulus-induced asset inflation .. “Since early 2010, energy producers have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank AG. With oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations. Research firm CreditSights Inc. predicts the default rate for energy junk bonds will double to 8% next year .. ‘Anything that becomes a mania — it ends badly .. And this is a mania.'” .. The Fed’s decision to keep benchmark interest rates at record lows .. has encouraged investors to funnel cash into speculative-grade securities to generate returns, raising concern that risks were being overlooked.”
