© Reuters. The Wall Street sign is pictured at the New York Stock exchange in the Manhattan borough of New York City, New York, U.S., March 9, 2020. REUTERS/Carlo Allegri/File Photo
High-grade corporate borrowers' average interest coverage ratio - how many times over a company's income covers their interest payments - fell to 10.71x last quarter from 11.24x in the second quarter, the Tuesday report's authors found based on preliminary data for 75% of companies in BofA's sample that tracks public debt issuers.
But the most recent decline came at the same time that company earnings grew. Median year-over-year earnings growth jumped 4.2% in the third quarter, from 0.6% in the second quarter, according to BofA Global. This has led to slightly improved leverage on companies' balance sheets, as higher-rated borrowers used their earnings to pay down some of their outstanding debt and ease pressure on refinancing costs.