Macro Voices MacroVoices #477 Michael Howell: Are We Approaching A Debt Refinancing Crisis
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Apr 24, 2025 AI Snips
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Credit Markets as Refinancing Systems
- The credit market functions more as a debt refinancing system than a credit origination system.
- About three out of four financial transactions involve refinancing existing debt, emphasizing balance sheet and liquidity flows over borrower repayment ability.
Debt to Liquidity Ratio Reveals Crisis
- The debt to liquidity ratio is a critical measure of refinancing risk and financial crises.
- High ratios indicate refinancing tensions and past crises have always been debt refinancing crises.
Investor Risk Cycle Tightening Now
- Investor portfolios follow a 9-10 year risk cycle, currently showing a sharp risk-off by US investors.
- Reduced risk appetite suggests more value may return to markets but downside remains before possible gains.