Wall Street Revives Risky Loan Deals That Banks Couldn’t Sell Bloomberg
Amidst persistent investor demand for yield despite higher interest rates, Wall Street is finding ways to package and sell riskier assets that banks were hesitant to keep on their books.
This indicates a renewed appetite for higher-risk, higher-reward financial products in the capital markets, potentially signaling a cyclical peak in credit markets or an increased systemic risk appetite.
The market's ability to absorb previously unsellable risky loans suggests a shift in risk perception and possibly a relaxation of underwriting standards or increased financial engineering.
- · Investment Banks
- · Hedge Funds
- · Private Credit Firms
- · Sophisticated Investors
- · Traditional Banks (holding risk)
- · Small Investors (indirect exposure to structured products)
- · Borrowers (if loan terms are predatory)
Increased availability of capital for riskier ventures and leveraged buyouts.
Potential for an increase in corporate defaults if economic conditions deteriorate, impacting structured product performance.
A cyclical build-up of systemic risk, reminiscent of previous credit market excesses, could lead to broader financial instability.
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Read at Bloomberg — Technology (Google News)