Wednesday, June 10, 2009

The Supreme Court Turns Out the Lights

My oh my! I truly did not think it would happen. The United States Supreme Court chose not to intervene in the Chrysler bankruptcy situation involving the Indiana bond holders. This is bad, bad news for the high yield corporate bond market. Slowly but surely, we will see bond yields increase. For bond investors holding these high yield corporate bonds, they we will see their principal values decline for these cash strapped corporations.

High yield bond issuers will feel the pinch the most. Bond investors will be very, very hesitant to put money into corporations with weaker balance sheets. This is especially true now that they know that their place in line in a bankruptcy is any where the government tells them.

You cannot go any higher than the Supreme Court and they turned out the lights.