“In a stagflation scenario, the risk is that rates will be higher for longer and credit losses will begin to accumulate, in particular for lenders to tech, growth, and VC, where borrowers are characterized by having no earnings and low coverage ratios.” Apollo
Sadly, today's gap up in markets won't fix this.
Per FDIC, the banking sector is currently holding almost $500 billion in unrealized losses on investment securities.
"In a stagflation scenario, the risk is that rates will be higher for longer and credit losses will begin to… pic.twitter.com/xHxj9fQhQg
— Samantha LaDuc (@SamanthaLaDuc) May 12, 2025
Yield on US 10-yr bond, now 4.44% following the trade war "pause" was 3.60% in September, when Fed began *cutting* rates. Fed controls overnight rate, but not the long end of yield curve, which usually determines the rate on new and refinanced UST debt, and thus interest expense. pic.twitter.com/yuXwpjU4Wm
— David Sommers (@dgsommersmkts) May 12, 2025