Federal Reserve, Justin Ho, Karen Rothman discussed on Marketplace

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Nor the details. Are that CHP is on the scene? Four twenty. This is marketplace, I'm KAI Ryssdal. We talk with some degree of regularity about bonds on this program government bonds, first of all, and they're also important interest rates also corporate bonds debt that companies issued a borrow money to expand an invest, but not all debt is created equal. There are bonds that are super safe, and there are bonds that are less safe, but more remunerative and that slice of the corporate bond. World has been showing some signs of trouble. Marketplace's Justin ho has that one corporate bonds are graded by the ratings agencies ratings like a double a triple b Karen Rothman is at John Hancock asset management the credit rating comes from the perceived risk of default bonds that score low are considered junk, the formal phrases high yield. And this is not an insult. It's a wager. Higher return higher risk of default. Rothman says junk bonds are common for companies that tends. To carry a lot of debt a good number of bonds are issued by energy companies other issuers in the market that are quite large. Telecommunications companies media and technology companies and healthcare companies sprint has been selling. Billions and junk bonds to help build its giant five G network. Del Sol junk bonds to finance and acquisition in two thousand sixteen junk bonds are part of a normal growing economy. But when there are signs the economy is slowing down that could mean that default rates in in the corporate space will pick up. That's Jeffrey Cleveland chief economist at paid in regal. He says that could explain why investors withdrew a record amount from junk bonds last year. The volatile stock market isn't helping investors appetite for risk either. Cleveland says junk bonds are a barometer for economic slowdowns the times when you see the worst performance in high yield are around the time of a recession. So if that's why money is leaving the space and that is that is more worrisome phenomenon. Investors aren't the only ones shunning junk bonds companies have an issuing them because those high yields are expensive to pay out. There wasn't a single junk bond sale on December. But there are signs of a recovery in the junk bond market for one companies are selling them again this month poetry per squalor, managing director at pan co prisoner if they wanna expand or they want to buy another company that some point some of the companies are going to be pushed by the realities of their business to come to the market. But there are still concerns pass qualley says right now investors are more worried about companies like General Electric, giant's beleaguered conglomerates whose corporate bonds haven't been given a junk rating yet the question. With certain companies like GE were to have a lot of debt on their balance sheet and their earnings are presumably on one trajectory, and that's downwards the are at risk off becoming downgraded to yield right now. There's roughly a trillion dollars kind of barely passing that debt gets downgraded. It would flood the junk bond market making their values fall, even lower in their yields even higher in New York. I'm Justin how for marketplace. President Trump signed the government employees fair treatment act of two thousand nineteen into law today unintentional irony aside, think about it for a second. It guarantees federal employees that they are actually getting paid whenever the shutdown finally ends. But there is a whole another group of people who are affected by this shutdown and most if not all of them aren't going to be getting anything when they go back to work government contractors is talking about people who do everything from computer programming to food service to you name it for the government, and that gets us to a special shutdown addition of our series, my economy stories of people, and how they are making a go of it out there this time, it's a retired government contractor near Washington DC. I'm Janet Martin. And I'm a retired software engineer used to work in government contracting. I started somewhere in the late eighties. So it was about twenty five years or so worked for many many different contracting firm. Firms little ones big ones. All across the spectrum the first shutdown. I went through was the Newt Gingrich shut down which was before this one the longest one ever. And I was very lucky. It was early on in my career. So I was not contributing a majority of income to the household. My husband had a good job at the time. It was just very stressful because I was home. I knew stuff was piling up. All I remember is. I ended up cleaning my house. All of them. I nervous energy. I remember running around the house cleaning everything some of the shutdowns were we were very lucky. They were just like, you know, shuts down on Friday opens backup by Monday. But some of them went on for a little while. Looking back on it. I realized that after that very first long shutdown that I was involved in. We always made sure we lived inside our paychecks. So we drive our cars till they literally fall apart in the driveway. We don't go on elaborate vacations. You know, we bought a house way back when thinking of eventually we would flip it for a bigger house. We've never done that it even affects me. Now. Even though I'm retired. I still kinda keep the expenses down as much as I can. We don't go out and go crazy. As I was listening to all of this shutdown information. I realized that's part of the decisions I've made over the years having this happen over and over and over again, you don't live. At the level that may be your paycheck would imply you could live because you know, that paychecks not. It may not be secure. Can't do this series without your help. So hook us up, and let us know how your economy is doing splash can do that at marketplace dot. Funnel note on the way out today in which I'm reasonably certain the Federal Reserve is just messing with it. The Fed's beige book came out today. The central banks regularly scheduled regional report on the American economy divided by its twelve districts. Well, the fed said was that most of the American economy is growing at a modest or moderate pace, which is fine, except we looked it up.

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