Credit markets are improving but three dark clouds on the horizon point to the possibility of worsening conditions ahead.
The lockdown has resulted in a surge in payment problems, with one in eight home loan borrowers now unable to keep up with their scheduled repayments.
The extraordinary number of small businesses that had problems paying their debts before this crisis began now have few options left.
Virgin’s downfall is another example of how the predominantly retail buyer base has long struggled to recognise the risks of hybrid securities.
Without going into insolvency soon, Virgin Australia risks going the way of Ansett and being sold off for scrap.
For those that seek out the illiquidity premium, this is a rare opportunity to increase your prospective return whilst decreasing the risk of long-term capital loss.
The changes to insolvency protections will allow the weakest business to accrue liabilities and inflict greater losses on their employees and suppliers.
From 2012-2019 central banks should have been unwinding stimulus, but instead they increased it and created a bubble in financial markets and the economy.