Corporate bond investors: Brace yourselves for a bleak midwinter

Borrowing starting to bite

Credit is unquestionably on many any investors mind right now – with the actions of the Fed having a significant impact on anyone holding corporate debt – including a lot of the big corporate debt issuers.

What we have seen over the past 10 years of ultra-low interest rates is astronomical growth in corporate borrowing - with the triple B sector growing to be about 50% of the outstanding debt in the US corporate bond market. Now, debt levels are rising at the same time as Powell in the US is indicating a further lifting of interest rates heading into 2023. As a direct response to this ongoing tightening of monetary policy, institutional investors must start looking at companies differently. Specifically, they need to start asking themselves whether businesses already levered up to th...