The credit markets are riskier and less liquid than they used to be. This is where trouble may show up first
Source: How to spot the next crisisWhere might trouble first emerge? The most likely venue is the corporate bond market. This has changed a lot over the past ten years. As late as 2008, more than 80% of non-financial corporate bond issuance was rated A or above, according to Torsten Slok of Deutsche Bank; in the past five years, the proportion has been consistently under 60%. That means the average corporate bond is riskier than before. At the same time, the reforms that followed the crash of 2008 mean that banks have to hold more capital (quite rightly). But this also means they are less willing to devote capital to market-making; as a result, the bond market is less liquid than before. So investors in corporate bonds are holding a riskier, less liquid asset.