U.S. corporations are currently facing the highest debt on record – more than $ 10.5 trillion, according to the Federal Reserve and the Securities Industry and Financial Markets Association (SIFMA).
The coronavirus pandemic is only part of the story.
In the corporate bond market, companies borrow cash. And for over a decade, the extremely low interest rates left over from the 2008 financial crisis have made borrowing easier and easier. Since then, US companies have regularly offered bonds for sale to take advantage of cheap access to cash.
Sometimes companies with debt can become reckless, and this can result in bonds being downgraded and given low ratings, giving those companies junk bond status. De-borrowing can turn companies into “fallen angels” or “zombie” companies.
Between rising interest rates and concerns about inflation, Wall Street is keeping a close eye on the bond market and checking the pulse of the US economy.
Watch the video above to learn more about how the corporate bond market got to these “bubble” levels, what fallen angel and zombie companies are, and how risky this massive debt can be to the US economy .