Rent’s Due, the ‘Shale Death Zone’, and a Warning Signal from the Bond Market

If this month’s rent or mortgage payment hurt a little more than usual, you aren’t alone. Small businesses are struggling to keep up with expenses following the first full month since “social distancing” entered the lexicon. Only 5% of businesses surveyed made their rent payments in full and the projections of the economic impact of such a change are already in the billions of dollars. How will these effects play out in the long-term? And as airline travel has ground to a halt (along with Warren Buffet’s $6 billion investment in the industry), we’re wondering about the potential impact to local economies that depend on tourism and annual influxes of college students to survive. A sustained decrease in air travel is yet another blow to the already precarious oil industry, where WTI oil prices have plummeted below their breakeven points, opening up a “Shale Death Zone” that is likely to spell the end for many small-time producers. Meanwhile, potential fallen angels are at a record high as ratings firms grow more critical—and discerning—in the coronavirus era. And despite surging QE from the Federal Reserve, unrest continues in the bond market where investment grade credit is still lagging and a widening spread to the high yield indicates trouble.