Banks and insurance companies still have time to come to grips with their commercial real-estate exposure, but the clock is ticking on the debt-ceiling standoff, said Rich Sega, global chief investment strategist at Conning.
“We are still in the early days on that,” Sega said of potential stress from a weakening commercial real-estate market. “We don’t see any immediate problems.” As MarketWatch’s Andrew Keshner wrote this week, a failure to increase the current $31.3 trillion U.S. borrowing limit risks sparking a selloff in financial markets and hurting people’s 401 holdings and more.
Insurance companies were the second-largest holders of debt in the $14.9 trillion U.S. corporate bond market with a roughly $3.2 trillion exposure, according to CreditSights. Foreign accounts were the biggest group at $3.7 trillion. Growing debt pressures In the early part of the COVID crisis in 2020, investment-grade corporate bond credit spreads blew out to 4%. The Fed responded to that credit freeze by rolling out a series of emergency facilities to shore up confidence in markets, including a program for the central bank to buy corporate debt for the first time in history.