“Corporate debt isn’t going to cause the next recession, but it’s where the pain will be in the next recession.”
U.S. Recession Would Spur ‘Massive’ Corporate Bond Losses, Eisman Says
The U.S. corporate debt market will suffer “massive losses” if the world’s biggest economy falls into recession, said Steve Eisman, the Neuberger Berman Group money manager who famously predicted the collapse of subprime mortgages before the 2008 financial crisis.
While the U.S. financial system is strong, “that doesn’t mean we won’t have a recession,” Eisman said in a Bloomberg Television interview in Hong Kong on Thursday. “And in a recession I think there will be massive losses in the bond markets because there’s a lack of liquidity.”
“You will see big losses in things like triple-B corporate debt, high-yield etcetera, but you need a recession first,” he said. “Corporate debt isn’t going to cause the next recession, but it’s where the pain will be in the next recession.”
Eisman’s early bets against the housing market before the 2008 crisis were chronicled in Michael Lewis’s 2010 book “The Big Short,” which highlighted money managers who profited from the market turmoil. A character based on him was played by Steve Carell in the movie adaptation of the book.
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