Liquidity Stress Spikes to Worst Level since Financial Crisis

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Liquidity Stress Spikes to Worst Level since Financial Crisis
by Wolf Richter • September 2, 2015


Moody’s blamed oil and the collapse of commodity prices. Earlier in August, it blamed the financial turmoil around the globe and the implosion of the stock market bubble in China. Earlier, it blamed the debt crisis in Greece. Because month after month, it has been getting worse.

But it should have blamed investors and banks. They’re licking their wounds from hefty losses on these deals. More losses are on the horizon. Folks began to look at these deals more closely. And now they don’t want them anymore, not at these low yields.

So Moody’s reported today that its Liquidity Stress Index, which rises when corporate liquidity weakens, spiked to 5.1% in August, from 4.1% in July. The worst level since December 2010.

The biggest contributor? The energy LSI. It spiked to 12.7% in August, from 10.5% in July, the worst level since January 2010, at the depth of the Great Recession.

More oil-and-gas companies fell into liquidity purgatory, as Moody’s downgraded them to its lowest liquidity rating, SGL-4. Energy companies account for a little over half of the denizens of SGL-4 purgatory. ....................(more)

http://wolfstreet.com/2015/09/02/liquidity-risks-spike-to-worst-level-since-financial-crisis/