WSJ week 3 Assignment

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WSJ week 3 Assignment

 

WSJ – Review 3

Article: Investors Turn Cautious on Consumer Debt – WSJ (Links to an external site.) (Links to an external site.)

Investors Turn Cautious on Consumer Debt

By Matt Grossman Matt Wirz | April 11, 2022

Topics: Asset-backed Securities, Subprime Loans

Summary: Investors are growing more skittish about bonds backed by consumer debt, worried that inflation and slowing growth will increase the number of low-income borrowers falling behind on car payments or credit-card bills. Buyers of bonds backed by subprime car loans or credit cards are demanding the highest premiums over interest-rate benchmarks since mid-2020.

Classroom Application: This article provides an opportunity to discuss asset-backed securities, the relationship between bond prices and yields, as well as, more broadly, the “subprime” and consumer finance markets.

Questions:

  • How have consumer finance-related bonds performed year-to-date and why?
  • Discuss trends during the past few years in consumer debt and related bond sales.
  • What are consumer asset-backed securities?
  • Despite rising delinquency rates, why are some investors and analysts optimistic about consumers’ financial health?