A decadelong rise in corporate borrowing is prompting new scrutiny about how debt markets might hold up in an economic downturn.
While few worry that the corporate debt market is in imminent danger, both regulators and investors are grappling with how stress could ripple through it. In a speech last week, Federal Reserve Chairman Jerome Powell ticked through a number of topics of concern, including the near record-level of business debt as a share of the economy; the increase in debt at the bottom end of the investment-grade...
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The plebes will bail them out again after they fail. Just like 2008, politicians will say the world will collapse unless the plebes give up more of their income through taxes. The slaves will bend the knee. The CEO's will be given massive bonuses for fleecing the lower classes.
Hopefully the Corporate bond rating system more precise than in 2008. Extreme downgrades exacerbated the downturn
If everyone moves out of China, as they should, borrowing should continue. Then the bottom line, thanks to the tax cuts, will allow stock issuance and debt pay down. WSJ should be supporting this.
what happens during the downturn in the QE era is the central bank suppresses the yields by printing money and bidding the bonds up. (yield ↓ = price ↑). capitalism solved, everybody wins.
Normally when corporations borrow a great deal it’s for profitable projects that demand it. For many companies they’ve simply used it to do share buybacks. Those companies are the ones that are the greatest risk of default in a downturn. All the debt, none of the assets.
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Source: MarketWatch - 🏆 3. / 97 Read more »