The Party’s Over in Credit Markets
Graphics demonstrate the potential dangers to corporate and emerging-market debt.
For a decade, low interest rates and investors’ hunt for higher yields allowed consumers and companies to borrow with ease. Now the Federal Reserve is tightening monetary policy in its campaign to rein in inflation. Bloomberg Markets took a look at where credit risks have built up and who may be most exposed as the cheap-money era comes to an end.
In the past 10 years the share of risky debt issued by corporate borrowers has gone up, while the share of such debt in consumer obligations such as mortgages and auto loans has fallen, according to a UBS Group AG report. “Everything points to corporate credit this cycle,” says Matthew Mish, UBS’s head of credit strategy.