Friday, October 24, 2008

High Yield Concentration: Banking Issues

Infectious Greed:

Using some new data today from Fitch Ratings, here is the concentrations of high-yield debt by sector in the U.S. The chart compares the current situation with the onset of prior recessionary periods beginning in 2000 and 1989. High-side anomalies.... include autos, banking, and energy, among others.

As Fitch points out, while we have less concentration this time around in specific at-risk sectors, like telecom, we instead have a host of sectors with significant high-yield exposure putting themselves at credit risk in the current downturn.
While there is less concentration among sectors compared to 2000, there is WAY less as compared to 1989. Unfortunately, back then, the largest concentration was in, you guessed it... bank, which fed into other areas of the economy. Expect banking to remain a large component, but concentration to increase outside of the finance sector as problems emerge EVERYWHERE.