We at Competitive Futures have told you about the solar revolution and the general transition to renewable energy and the shift to the electrical grid as a driver of GDP. Also, we’ve mentioned the relationship between junk bonds and cheap gasoline. We’ve even mentioned how coal is still “king,” but that the clock was ticking on this reality.
Tick. Tock. DING.
The charts below are four trends showing the yield of the junk bonds underlying the four largest U.S. coal companies. The higher the yield on the secondary market, the more that analysts feature a default on the bonds.
Four charts tell the tale of where U.S. coal companies stand in this transition.
Peabody Energy Bond Yields
Arch Coal Bond Yield
Cloud Peak Energy Bond Yield
Alpha Natural Resources Bond Yield
What it means
Most solid corporate bonds are yielding 2-5%.
Junk bonds yield around 9%.
Buying the junk bonds of U.S. coal companies on secondary markets currently yield for 13%-70%.
Major shift is underway. What does it mean for your company?