Corporate debt markets: The Achilles heel

US bond markets will be the canary in the coal mine in this cycle; if they falter, no one will be spared

As mentioned previously, this business cycle in the US is very long in the tooth. We are now in the second-longest economic expansion ever, and by March next year it will become the longest. Given the duration of the current expansion, many naturally worry about the next recession. When will it arrive? How severe? Which markets will get dislocated?

There is a strong feeling among many professional investors that the weak link this time will be the corporate bond market, specifically the high yield bond market. A recession will weaken corporate credit quality, and lead to losses and defaults —