Credit Cycle Monitor – 5.31.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • We still see the credit cycle narrative structure as complacent, although anecdotally we have observed increasing expressions of concern in leveraged loans / direct lending / CLO land that are not emerging in this analysis.
  • We are examining both sources and query structures to make sure we are capturing a sufficiently broad base of articles to represent this topic.
  • Elsewhere, concerns emerging in credit markets appear to be broadly consistent with equity markets, which is to say focused almost exclusively on trade and tariffs issues.
  • Also similarly to other monitors, we are seeing distinct narratives form around politically sensitive credit areas – in this case, farmers and students are emerging as debt topics of note in financial media coverage.
  • No material change in sentiment or fiat news levels.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

The three letters sparking fears of another global financial crisis [Sydney Morning Herald]

Federal Reserve Warns as Risky Corporate Debt Exceeds Peak Crisis Level [NY Times]

Markets Are Entering Trade War Purgatory [Bloomberg]

All eyes on Italy ahead of crucial S&P review [Global Capital]

Goldman to offer equity in new direct lending fund [Global Capital]

Credit Cycle Monitor – 4.30.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • We are now comfortable characterizing the credit market narrative structure as complacent.
  • There is very little overall structure to any one narrative about risks to credit markets, defaults or liquidity, and general coverage continues to be quite positive in sentiment about lending.
  • In addition, each of the notable credit events large enough to merit a cluster of articles is visibly separate from the core of financial journalism.
    • In other words, the only people talking about Canadian Banks, China Debt Traps in the Philippines, or HNA’s CWT International are people talking about those specific issues.
    • They are not being pulled into broader discussions of fixed income and credit markets.
  • As noted elsewhere, the student debt market continues to be central to most coverage of credit markets.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Provincial banks suffer rising bad loans [Korea Times]

Where customers are also lenders: One fintech’s payday alternative [American Banker]

Bond liquidity: special focus [EuroMoney]

Beware the Buyer’s Strike in Corporate Bonds [Washington Post]

Latecomers to Europe’s Credit Rally May Struggle for Gains [Bloomberg]

Credit Cycle Monitor – 3.31.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • We continue to see some complacency in most coverage of credit markets, with no hint of a narrative of systemic risk, slowdowns in lending, default concerns or ‘late-cycle’ at this point.
  • Discussions of credit markets in media continue to appear as derivatives of risky asset drivers more broadly, which is to say heavily influenced by central bank omnipotence narratives.
  • Even leveraged loans and buyout leverage highs are at the full periphery of the narrative structure – barely meriting a mention in most articles.
  • Other on-again / off-again topics like student loans and household borrowing remain muted and detached from the focus of discussions of the performance and positioning of credit investment strategies.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Narrative Cohesion

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

Easy digital loans drive Kenyans into multiple debt

Opportunities In The 2X Leveraged High Yield ETN Sector

U.S. Corporate Debt Is on Fire This Year Thanks to Japan

China Feb new bank loans fall but policy support still on track

The Bomb That Blew Up in 2008? We’re Planting Another One

Credit Cycle Monitor – 2.28.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • As we noted in our Zeitgeist post on March 4, we see the rather unseemly search for yield among many large institutions (and not just in Japan), but neither see the fundamental case nor narrative of systemic risk at this point.
  • There is little idiosyncratic cohesion within credit market narratives – we frankly see most of these discussions as a derivative of risky asset drivers more broadly, which is to say heavily influenced by central bank omnipotence narratives.
  • The most centrally connected cluster here IS the central bank pivot-focused cluster, not a cluster relating to issuance, structured credit, leveraged loans, auto delinquencies or mortgage concerns in Aussie, Canada or UK.
  • Other on-again / off-again topics like student loans and household borrowing remain muted.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Narrative Cohesion

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

Trouble Brewing In China’s Credit Markets As More Bond Defaults Come

Central Bank Balance Sheet Reductions – Will Anyone Follow The Fed?

The benefits of better credit-risk models will be spread unevenly

Banking systems in emerging markets face three major risks

Loan Options to Help Pay Your Medical Bills

Credit Cycle Monitor – 1.31.2019

Access this month’s monitor slides in Powerpoint and in PDF.

Access the data in Excel.

  • The attention on credit and credit cycles has increased slightly, but most of this increase is attributable to the spike from December. Point estimates in January remain subdued.
  • The topic remains poorly connected. Most articles continue to be narrow, typically covering one credit segment, country, or market.
  • We are, however, at the point in the credit marketing cycle where dynamic, tactical, multi-strategy credit pitches come to the fore.
  • Important topics that we would want to see much closer to the main market topics before we increased our focus here:
    • Consumer credit
    • Home prices
    • Issuance

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

PG&E Isn’t a Powder Keg, Bond Traders

Prolonged Shutdown Risks Tarnishing Appeal of Dollar, Treasuries

Europe’s High-Yield Bond Market is Cheap, But May Not Be Cheap Enough

Global economy is on an irreversible path to a downturn

Why Calgary homeowners turn to private lenders

Volatile market hits Morgan Stanley’s trading, wealth management

Credit Cycle Monitor – 12.31.2018

Access this month’s monitor slides in Powerpoint and in PDF.

Access the monitor values in Excel.

  • As we noted in November, missionaries in force were a leading indicator for increased attention on credit cycle topics. Attention has ticked up in our most recent calculation, and fiat news levels remain elevated.
  • The topic remains poorly connected. Most articles are narrow, typically covering one credit segment, country, or market. For reference, we have typically found that credit topics become much more connected and related to investment strategy / market narratives during periods of stress for credit markets.
  • The prevalence of “late cycle” and “junk bond” language has increased as well, but not dramatically so.
  • Important topics that we would want to see much closer to the main market topics before we increased our focus:
    • Consumer credit
    • Home prices
    • Issuance
    • Liquidity

Narrative Map

Source: Epsilon Theory, Quid

Narrative Attention

Source: Epsilon Theory, Quid

Fiat News Index

Source: Epsilon Theory, Quid

Narrative Sentiment

Source: Epsilon Theory, Quid

Key Articles

ADDC to share bill payment data with credit bureau

Cold War explores political oppression, the power of music and romance

Falling house prices to trigger spending strike

Regulators criticize loans as concerns grow about falling recoveries

How to Invest in the Face of Risk in 2019

Regulators must use instruments to stem loan default growth

LQD: Have We Forgotten About Credit Spreads?

Bank OZK: A Sober Review Shows The Concerns Are Priced In

Credit Cycle Monitor – 11.30.2018

Access this month’s monitor slides in Powerpoint and in PDF.

Access the monitor values in Excel.

  • Our single point attention measure rose from floor levels in November, although our smoothed rolling measures have only moved slightly. The main cause appears to be significantly tighter and shared language across articles about fed activity and inflation, about bond funds and about leveraged loans and CLOs.
  • We’ve also seen “junk bond” take over from “high yield” as the top n-gram for some topics.
  • Sentiment, however, has rebounded back to normal levels for the topic. We don’t have a ready explanation for this, although many of our monitors took a downward turn during the election cycle. 
  • We have also observed fiat news measures rising to unusual levels, even for a topic that is very often “explained” to readers. While on its own we don’t think this has much explanatory power, we do think it tends to be indicative of newly established or changing narratives, something we will be able to evaluate over the coming months.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

Home loans defaults set for ‘moderate’ rise

High oil prices to amplify fiscal pressures

Dealing with debt in the UAE: First-hand accounts

Multi-Asset Credit: Buyer’s guide to multi-asset credit

Sovereign bond yield spreads and sustainability: An empirical analysis of OECD countries

The joint dynamics of sovereign ratings and government bond yields

Credit Cycle Monitor – 10.31.2018

  • While articles including key credit terms continued to rise in October, their internal coherence continued to fall. This means that stories tended to cover individual countries, regulators, companies or debt markets without explicitly or implicitly identifying connections between them. 
  • Even within similar topics, articles varied between reviews of compressing spreads and strong lending markets and a new group of articles exploring potential risks for these funds going forward, especially in CLOs and leveraged loan topics. 
  • While it is a narrow data point, we have seen a small up-tick in fiat news and advocacy journalism in a topic that is already fairly well-populated by such pieces. 

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Sentiment Index

Source: Quid, Epsilon Theory

Key Articles

More house prices falls look likely unless regulators intervene

IL&FS fallout: Finance firms face fund crunch

Italian banks caught in vicious circle as bond spreads hit danger threshold

There is a new IMF in town and it’s called China

Ameritech Financial: Could Almost Half of Student Loan Borrowers Be in Default by 2023?

Asset Gatherer versus Asset Manager: What Happens When a Core Bond Strategy Gets Too Big?