Chart of the week: America’s corporate debt binge

US households have spent much of the past decade deleveraging, notes John Mauldin in his Thoughts From The Frontline newsletter. Companies haven't. They have grown debt much faster than earnings, not least because many have borrowed to fund stock buybacks rather than invest in their operations.

The upshot is that firms are 50% more leveraged now compared to their profits than in 2007. The quality of investment-grade paper has also deteriorated: the lowest tier, BBB-rated debt, now comprises 50% of all issuers. "All these are just one downgrade away from being junk bonds'." Many funds are not allowed to hold junk, so their forced selling will exacerbate the downturn when the next recession hits.

Try 6 free issues of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up for MoneyWeek’s free twice-daily newsletter.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.