Bad debt goes for low prices which means higher yield or yield to maturity (minus default). Or, to put it another way, how does bad debt sales translate into interest rates in the overall market?
yitbos
Frankly, this does not have much pressure on AAA rates, but what it does do, is steepen the credit quality curve. The spread between treasuries and junk debt expands with changes in attitude about default risk, as well as supply. Attitudes about corp debt have obcvioulsy gotten worse, and the supply gets huge when C and MER may bring 1.5t to that arena. Throw in all the major banks, regional banks, then the insurnace companies... Supply enough to choke on. Now, at some point, that becomes a really good deal, for buyers. I can explain more in detail why this becomes such a good deal, if you want.