The Coming Credit Crunch
The JPMorgan Chase & Co. offices in London. It’s crunch time for banks as an inverted yields curve will pressure net interest margins and force a halt to credit to the weakest borrowers.
Photographer: Chris Ratcliffe/BloombergA deeply inverted yield curve is threatening to curtail banks’ net interest margins. That will end up creating a credit crunch that will be particularly acute in leveraged loans, European debt and emerging markets.
Bank earnings begin later this week. One thing to look for is signs that credit is tightening. That’s because, with the Federal Reserve raising interest rates aggressively, credit markets are starting to buckle.