This is interesting and worth keeping an eye on: US C&I (Commercial and Industrial) loan delinquencies have started to turn up, signalling the turn in the credit cycle. A rise in delinquencies implies a tightening in bank loan terms with about a one-year lag. We would expect lending to be weakening from here on out …


It also has implications for Equities, of course:

VIX volatility (the volatility index for the implied volatility on the S&P500 equity index, and a generally accepted barometer of market sentiment / risk appetite) tends to follow a similar cycle: volatility tends to increase with a modest lag from delinquencies (hardly surprising that equities dislike tightening credit conditions).


Unsurprisingly, the equity index itself moves with volatility in a lag from credit conditions:


These are just interesting credit developments worth watching, in our opinion.

This fits together with the pressure on European banks, and impending credit contraction, that we have previously highlighted.

And with conditions outside China tightening – Singapore and Hong Kong are prime examples of the credit crunch enveloping S East Asia – it leaves China’s 25% y/y credit growth looking quite anomalous, apart from being entirely unsustainable.