U.S. companies now face the highest ranges of debt on record — greater than $10.5 trillion, in accordance to the Federal Reserve and the Securities Industry and Financial Markets Association, or SIFMA.
The coronavirus pandemic is simply a part of the story.
The corporate debt market is the place companies go to borrow money. And for over a decade, super-low rates of interest left over from the 2008 monetary disaster have made borrowing simpler and simpler. Since then, U.S. companies have often supplied up bonds on the market, benefiting from the low-cost entry to money.
Sometimes companies can get reckless with debt, and this may consequence in bonds dealing with downgrades and low rankings, placing these companies at junk bond standing. Overborrowing may end up in companies changing into “fallen angels” or “zombie” companies.
Between rising rates of interest and inflation considerations, Wall Street is watching the bond market intently and checking the pulse of the U.S. economic system.
Watch the video above to study extra about how the corporate bond market received to these “bubble” ranges, what fallen angels and zombie companies are, and simply how dangerous this large quantity of debt could also be to the U.S. economic system.