Features

Chart of the week: US corporate-debt bubble ready to burst

American consumers may have paid off some debt after the financial crisis, but the state and corporations went on a binge – total US non-financial corporate debt has hit a record of more than 46% of GDP.

933_COTW

Not for the first time, America has "fought a debt bubble by adding on more debt", says David Rosenberg of Gluskin Sheff. Consumers delevered a tad after the financial crisis, but the state and corporations went on a binge.

Total US non-financial corporate debt has hit a record of more than 46% of GDP. Indeed, the chart of corporate debt-to-GDP this cycle looks "a lot like the mortgage debt-to-GDP ratio of a decade ago". And just as we saw with the mortgage market, the "junky nature" of company debt is a major worry.

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Half the $6trn investment-grade corporate paper market is made up of BBB-rated debt the lowest level before it officially becomes junk. The value of the BBB segment has soared fivefold in a decade.

Viewpoint

Jeremy Warner, The Sunday Telegraph

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