This tag analyses the dynamics of private credit: leverage expansion phases, refinancing conditions, liquidity stress and contraction. The credit cycle amplifies or restrains the real economic cycle and is often a leading indicator of turning points. Financial crises almost always emerge from an excess of credit followed by an abrupt tightening.
Identifying an ongoing credit cycle remains a methodological challenge. Data are released with delays, signals are contradictory, and cognitive biases distort interpretation. Definitive diagnoses are typically only possible in hindsight.
A credit crunch marks a sudden contraction in credit supply, decoupled from borrower fundamentals. Its macroeconomic effects propagate unevenly, hitting bank-dependent agents far harder than those with market access.
Household and corporate credit do not activate the same macroeconomic mechanisms: one supports aggregate demand, the other conditions productive capacity. Aggregating both masks divergent dynamics with different implications for potential growth.
Bank intermediation amplifies credit cycles asymmetrically: tightening in stress phases unfolds two to three times faster than easing in recovery phases. Capital ratios and risk models attenuate but do not eliminate this procyclicality.
Real estate combines long maturities, high household leverage and supply rigidities. This configuration makes property prices particularly sensitive to financing conditions and amplifies credit-cycle dynamics.
Outstanding credit can keep growing even as activity decelerates. The stock-flow distinction explains the lag between new credit production and the existing balance, and why focusing on the stock alone misleads cyclical diagnostics.
The VIX and the high-yield credit spread were correlated at 0.65-0.80 over 2000-2019, equity mirror of the same stress signal. That correlation collapsed at end-2023: both indicators are simultaneously compressed, but their historical synchronicity has vanished. TL;DR Correlated at 0.65-0.80…
The aggregate NFCI masks its internal machinery. Beneath the composite score, the Chicago Fed publishes three sub-indices in parallel — risk, credit, leverage — each built from a subset of 105 weekly series. TL;DR A zero NFCI can mean two…
In late 2025, HY OAS prints around 300 basis points — a level only observed across three short windows since 1997, never sustained for long. This compression coexists with four dynamics that, taken individually, would argue for a wider spread.…
Between July 2007 and November 2008, the HY OAS moved from 280 to roughly 2,020 basis points — the sharpest widening on record since the series began in 1997. This chronology aggregates four rarely simultaneous dynamics: bank-liquidity stress, realized defaults,…
