As junk bonds crash Goldman Sachs releases debt chart

Want a summary of the $35 trillion Western debt market?

Goldman Sachs recently released a chart that summarizes how much the various types of bonds pay out on an annual basis. Since the yield for so-called low-risk investments has plummeted, investors’ hunger for yield has soared, and have thus turned towards junk bonds, a type of debt issued by companies without an investment grade credit rating.

Here is the chart:

Here is a statement from Goldman Sachs accompanying the chart:

“First, to the extent rising rates are a response to stronger growth, risk appetite should remain firm and thus drive spreads tighter. At the same time, we expect the normalization of policy rates to be gradual. And while an inflationary shock leading to higher rates could obviously push spreads wider, such a scenario remains unlikely, in our view.”

Ostensibly, junk bonds are tanking, and one prominent billionaire investor believes this is just the beginning.

Via Bloomberg News:

A day after a prominent Wall Street firm shocked investors by freezing withdrawals from a credit mutual fund, things only got nastier in the junk-bond market. Prices on the high-risk securities sank to levels not seen in six years and, to add to the growing sense of alarm, billionaire investor Carl Icahn said the selloff is only starting.

Carl Icahn tweeted out: “The meltdown in High Yield is just beginning.”