Guess what? 0% interest rates are highly addictive. And not just in the psychological sense. No, the addiction is physical and therefore that much more difficult to break. For many institutions super cheap money is necessary even to function.
Some wonder if this is even true for the US government itself.
Michael Contopoulos, high-yield strategist at Bank of America Merrill Lynch, said the high-yield space is a mess no matter what the Fed does. Global economic weakness and deteriorating fundamentals are making it increasingly harder for the Fed to underwrite junk debt through a zero funds rate.
“We have been saying for months that the global economy is weak and the Fed’s dovish disposition (Thursday) only bolsters our view,”…
…”The Fed had an opportunity (Thursday) to hike rates and begin to build a cushion should the global slowdown be so severe it can’t be ignored. Instead, they chose to wait,” he said. “We’re in the midst of watching a slow-moving train wreck, and in our view the Fed confirmed as much.”