Finance & economics | Bloody but unbowed

The credit market hasn’t cracked yet

It is undergoing a painful repricing, but not veering into dysfunction

A view of a Morrisons supermarket in Stratford, east London on June 21, 2021. - Shares in British supermarket chain Morrisons surged today after it rejected a £5.5-billion ($7.6-billion, 6.4-billion-euro) takeover approach as too low. (Photo by Tolga Akmen / AFP) (Photo by TOLGA AKMEN/AFP via Getty Images)

May 26th 2022

At their best, capital markets hold up a mirror to the real economy. They rise and fall in tandem with companies’ fortunes, encouraging investors to direct money towards the firms most likely to make a return on it. But the arrow of causality can also fly the other way. A dysfunctional market can choke off the supply of capital even to healthy firms, forcing them into default for no better reason than that financial conditions have tightened.

This article appeared in the Finance & economics section of the print edition under the headline “Bloody but unbowed”