General Electric Caution Signs Are Flashing in Credit Markets (5Y CDS Rises To Near 200 As Earnings Continue To Sag)

Too much debt?  Declining earnings per share? All of the above??

(Bloomberg) — General Electric Co. may still have a relatively solid investment-grade rating, but investors aren’t taking their chances. They’re snapping up derivatives that protect against losses on the company’s debt.

The cost to insure against a default by GE for five years climbed to as high as 211 basis points in early trading, credit-default swaps prices from CMA show. That’s almost double what it cost just two weeks ago, and it’s the kind of level that hasn’t been seen for the company since the waning days of the global financial crisis.

That’s still well below the peak crisis levels for GE’s finance unit back then (GE Capital CDS surged to more than 1,000 basis points in March 2009). But the pace of the increase has been rapid, particularly when compared with the broader investment-grade market. Yields on some of GE’s bonds have also reached levels that are in line with junk-rated bonds, Bloomberg Barclays index data show.

gecds

This is not surprising given the performance of GE’s equity and 5% perpetual bonds.

geeq5perp.png

Yes, GE’s earning per share have been in a state of cardiac arrest for a while now.

gesaggingearnings.png

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