Deleveraging – What Deleveraging?


Corporate bond issuance is the same way.

In May, investment-grade issuance totaled $103 billion and high-yield $24.4 billion. In the first five months of the year, they were $509.8 billion and $106.6 billion respectively. At this pace, total issuance is on course for $1.5 trillion this year, which would be up substantially from last year’s $1.3 trillion (Chart 3). That said, 2018 issuance was down 19 percent from 2017’s record $1.7 trillion, so the growth rate this year looks exaggerated. Nevertheless, at the current pace, last year’s downward momentum would have been broken.


This comes at a time when corporate debt is already at a lofty level.

In 1Q19, US non-financial corporate debt increased $187.9 billion sequentially to $9.9 trillion – a new high. Since Great Recession ended in 2Q09, these corporations have added $3.4 trillion.

For perspective, Chart 4 calculates corporate debt as a percent of national income. The latter was $17.8 trillion in 1Q19.  During the quarter, corporate debt made up 55.7 percent – once again a new high. This is uncharted territory. This in and of itself does not mean the metric has to revert. The upward momentum has been intact for decades. But the higher it goes, the more the pain when the law of gravity finally exerts control.

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