Credit Market Moves Toward Break Point as Sales Flop, Funds Flee

Credit markets are starting to buckle under pressure from soaring yields and fund outflows, leaving strategists fearing a rupture as the economy slows.

Banks this week had to pull a $4 billion leveraged buyout financing, while investors pushed back on a risky bankruptcy exit deal and buyers of repacked loans went on strike. But the pain was not confined to junk -- investment-grade debt funds saw one of the biggest cash withdrawals ever and spreads flared to the widest since 2020, following the worst third quarter returns since 2008.

“The market is dislocated and financial stability is at risk,” ...