The amount of corporate bonds in circulation rose at problematic levels in October, marking the first increase in seven months, according to JPMorgan research.
The impact of rising interest rates contributed significantly to the rise. High-yield bond holdings rose $40 billion in October to $674 billion, according to JPMorgan data.
The report’s authors indicated that due to the impact of rising interest rates on exchange rates, the volume of subscriptions has jumped to problematic levels exceeding the March 2020 level.
Several issuers contributed to the unfavorable October figure, including pharmaceutical company Bausch Health, telecommunications company Altice and enterprise technology provider Lumen Technologies.
A rise in corporate bond yields indicates that the issuer is unable to make payments. This usually results in a poor credit rating due to the risk of default.
Looking ahead, credit rating agencies such as Moody’s and Fitch expect an increase in default rates until 2024. These expectations come as a result of the impact of the US Federal Reserve’s interest rate hike cycle on corporate balance sheets.
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