Wall Street expects U.S. companies to slow their borrowing in debt markets, but only by a little, as slightly more expensive conditions take hold and the Federal Reserve moves to reduce monetary aid later in November.
Investment-grade companies and those in the small but riskier high-yield, or “junk,” category borrowed almost $2.3 trillion in the bond market in 2020, a 60% increase from a year before, plus another $1.6 trillion this year through September, according to the Securities Industry and Financial Markets Association.
The junk-bond JNK, +0.39% sector already issued $451 billion in 2021, only $17 billion below last year’s record. A significant portion of pandemic corporate bond issuance has gone to refinance maturing, more expensive debt. “As the taper happens, that is something that needs to be carefully managed by companies,” he said. “You don’t want to keep on levering into higher interest rates if you can avoid it.”
Many U.S. companies pulled forward their borrowing needs this year to lock in the best long-term rates. Credit ratings firms have responded in the recovery period with a host of upgrades.
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