At 9fin we pride ourselves on the accuracy of our deal predictions. Our approach is probabilistic, so after seeing plenty of signs of softness in LevFin primary last week, you could forgive us for not predicting the arrival of two HoldCo PIKs and a CCC-rated tap for an LTM EBITDA negative biz on Monday and Tuesday. (Though we did say as early as July 2019 that Burger King France could issue a whopper of a PIK). But the main takeaway for us is that investors are becoming picky eaters and increasingly wary about the fare served up by bankers and their too clever by far lawyers. 

Supply chain issues, the rising cost of labour amid labour shortages, sharp rises in energy prices and most commodities, is shifting mindsets that the current troubles are not transitory, and we could be in for a difficult quarter or three, impacting the rosy perception of corporate profitability. 

While central banks have yet to blink, there is now some concern that not doing so could be a major policy error. As Bill Blain writes: Financial Assets remain seriously distorted by the consequences of the last 10 years of QE and ultra-low interest rates. It would be a policy mistake not to unravel the multiple negative market consequences of bad policy. However, to do so – by tapering QE purchases, raising interest rates, and causing investors to question the implicit put they think Central Banks have given markets – will likely trigger a market tumble, and thus be a policy mistake.