European corporate debt markets have become “intoxicated” by monetary stimulus from central banks and “aggressive” transactions are in danger of reaching the excesses seen before the global financial crisis, ratings agency Standard & Poor’s has warned.
“Artificially low interest rates not only encourage an inefficient allocation of capital but create the incentive for excessive speculation in financial markets that ultimately risk doing more harm than good when boom turns to bust,” Credit Analyst Paul Watters warned in S&P’s quarterly European corporate credit outlook on Monday afternoon.
“The greater use of leverage and a growing number of aggressively structured transactions in the European leveraged finance market is reminiscent of some of the excesses of the 2006-2007 boom period.”
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