Core Insights - The U.S. credit market is experiencing alarming bond crashes, with significant declines exceeding 60% in a matter of days or weeks for various companies, including Saks and New Fortress Energy, raising concerns about a potential new normal in a bubble-like market [1][2] Group 1: Recent Bond Crashes - Recent bond crashes have shown a rapid and alarming pattern, with Saks' bonds dropping from 80 cents in March to below 40 cents by May after only one interest payment [3] - New Fortress Energy and Tricolor Holdings have also faced severe declines, with Tricolor filing for bankruptcy, leading to substantial losses for investors [3] Group 2: Structural Issues in the Credit Market - Investors have abandoned long-term creditor protections in a low-interest-rate environment, seeking minimal additional yields, which has contributed to the current market vulnerabilities [2][4] - The lack of protective clauses in bonds, as seen in the Saks case, has allowed companies to negotiate terms that disadvantage other investors [4] Group 3: Due Diligence Challenges - The credit market has become increasingly opaque, making due diligence more difficult, particularly for private companies like Tricolor and First Brands, which are less scrutinized than public firms [5][6] - First Brands has received over $10 billion in funding despite limited transparency regarding its business model, leading to concerns about its financial health [5][6] Group 4: Market Warning Signs - Although the overall credit market returns remain strong, these bond crashes may signal a larger impending adjustment, with significant capital inflows into high-yield and leveraged loan funds creating a bubble [7] - The excessive behavior in the market, driven by near-zero benchmark rates and stable growth, has led to over-leveraging, with potential systemic shocks anticipated as the bubble bursts [7]