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Credit Is the Scariest Market to Watch, Not the Dow or S&P

Markets for newly issued company debt and commercial paper have already prompted the Fed to step in.

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Photographer: krisanapong detraphiphat/Getty Images

While drops in the Dow and S&P dominate the headlines, the market that has many traders and policymakers most on edge right now is debt—that is, bonds and loans. The free-flowing credit conditions that defined the last decade are no more.

Weeks of virus-induced volatility have almost shut down the markets for newly issued company debt, and even short-term IOUs, known as commercial paper, showed enough signs of stress to prompt the Fed to step in. With the usual corporate fundraising outlets closed, companies including Hilton Worldwide, Kraft Heinz, and Caesars Entertainment are tapping credit lines to get fast backup cash.