By Dena Aubin
NEW YORK (Reuters) - The aftershock if a corporate takeover fails to get financing is one of the biggest potential threats to the credit markets this year, fixed-income strategists said this week.
As funding needs for a record buyout spree swell, a sign that credit is getting tighter could send reverberations through several markets, Gregory Peters, Morgan Stanley's chief U.S. credit strategist, told the Reuters Investment Outlook Summit in New York.
"If there's one thing that concerns me more than anything else for the markets writ large, and that includes equities, it's one of these deals getting announced that can't get financed," he said.
"That really creates a crisis of confidence in the system that halts anything else from getting financed," Peters said.
Private equity players are keeping a close watch on the credit markets as the backlog of takeover financings grows.
Funding needs for leveraged buyouts now total about $301 billion, including about $89 billion of bonds and $212 billion of loans, according to a Bear Stearns report this week.
Risk premiums, or the extra yields that companies pay to sell bonds, have not risen in a sustained way in more than two years, though there have been temporary bouts of widening over that time.
Such bouts of "risk flares" could become more frequent, even as the world economy remains in good shape, said Jack Malvey, Lehman Brothers' chief global fixed-income strategist. Continued...
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