Corporate Borrowing Costs Spike as $365 Trillion Global Debt Fuels Junk Bond Reckoning
Updated
Updated · POLITICO · Oct 6
Corporate Borrowing Costs Spike as $365 Trillion Global Debt Fuels Junk Bond Reckoning
3 articles · Updated · POLITICO · Oct 6
Summary
Corporate debt yields are rising faster than long-term government rates, a shift investors increasingly read as stress building among weaker borrowers ahead of earnings season.
Higher interest rates, tariff uncertainty, energy costs and heavy global borrowing have made investors more selective, while junk bonds now compete with safer Treasury yields and AI-related debt demand.
Triple-C-rated issuers are taking the hardest hit, and more than 50% of Russell 2000 companies cannot earn enough to service their debt, with health care, discretionary and financial firms under particular pressure.
A wave of maturities starting next year could deepen the strain, leaving less cash for hiring and investment even if the broader economy stays supported by AI spending.
Economists say the corporate bond market is among the clearest channels for Fed tightening to bite, raising the risk that further rate hikes dent employment and non-AI business investment.