Good chart from [Fed Vice Chair] Jefferson’s latest speech showing how many corporate borrowers have yet to feel higher rates. https://www.federalreserve.gov/newsevents/speech/jefferson20231009a.htm
The sectors that have higher refinancing needs in 2024 are Leisure, Retail, and Capital Goods in investment grade. And Transportation, Real Estate, and Autos in high yield, see charts below. Source: ICE BofA, Bloomberg, Apollo Chief Economist Source: ICE BofA, Bloomberg, Apollo Chief Economist Continue reading here.
US junk bond issuers are poised to unleash a new wave of refinancing activity after back-to-back years of low volume, as the share of debt with near-term maturities climbs to the highest level in over a decade. The amount of outstanding junk bonds set to mature in 18 to 36 months has soared to levels
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Higher credit yields increase corporate capital costs. And higher cost of capital puts pressure on coverage ratios and corporate profitability. With lower coverage ratios and lower profitability, credit risks increase, and the result is that credit spreads should go wider. That is, however, not what is happening at the moment. The current disconnect between credit
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Since the Fed started hiking in March 2022, default rates have been moving higher, and every day there are companies that cannot get a new loan or refinance an existing loan. This is how monetary policy works. A higher cost of capital makes it harder for firms to get financing. With the strong uptrend in
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Corporate profits contracted by 6.5% year/year in 2Q23 … acceleration to downside from prior quarter’s 1.8% decline; worst drop since pandemic
I’ve been a broken record on the forthcoming corporate credit bust–and the CERTAINTY that it would be worse than the GFC– for a year and half. It’s now starting to unfold… Busiest August for Bankruptcy filings ON RECORD
Oaktree Capital Management co-founder Howard Marks said he expects more companies to default on their debt as higher interest rates make it harder for struggling companies to raise capital. “When you go through a period when it’s super easy to raise money for any purpose or no purpose, and you go into a period when
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How in the world are high yield spreads going DOWN right now? Consumers are running out of money to spend. Consumer credit is through the roof. Defaults are rising. Bankruptcies are rising. We’ve got a de facto recession in Europe. China is imploding. Student loan payments just restarted. Yet investors are demanding LESS return for
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The Fed has hiked rates 525 bps since March 2022 but the net interest payments of corporations has actually declined. Why? Many companies locked in low interest rates on their debt in 2020-21 and are now earning much higher yields on their cash.
