U.S. corporate debt soars to record $10.5 trillion

MarketWatch/Joy Wiltermuth

“[H]alf of investment-grade corporate debt, or $3.6 trillion, resides within the borderline BBB credit-ratings category, only a few notches away from speculative-grade, or ‘junk,’ territory. A longtime worry among investors has been that an economic downturn or a sustained cycle of BBB downgrades by credit-rating firms could swamp the junk-bond market, which BofA pegs as roughly 250% smaller than the BBB segment.”

USAGOLD note:  This article goes on to provide some insight as to who owns U.S. corporate debt – funds and ETFs (22%), life insurance companies (20%), pension funds (11%), households and non-profits (8%).  Some of it is relatively safe; some of it isn’t.  The abiding hope is that the Fed can keep the corporate debt market from imploding with continuing injections of liquidity, and that the rating agencies will refrain from dropping the guillotine on the weakest elements. The chart below illustrates the  near-vertical growth in corporate debt in 2020 (shown as the change in billions of dollars from year ago).

Chart courtesy of St. Louis Federal Reserve • • • Source: Board of Governors of the Federal Reserve

Repost from 9-3-2020