Bond Covenants
The popularity and restrictiveness of bond convents moves in a cycle. During good times, with low interest rates, rapid economic growth, low default levels and general optimism, covenants get watered down or disappear altogether. During more pessimistic times with slower growth, higher interest rates, rising default levels, etc. the popularity, prevalence and severity of covenants makes a comeback. This pattern is similar to what we see in other forms of lending as well. Please comments on this as to how covenants play into the overall availability and pricing of credit.
