Corporate debt across the world has reached extreme levels, warned the Institute of International Finance (IIF), a trade group of financial institutions. The global banking watchdog added that it far exceeded the pre-Lehman financial bubble.
‘As the credit cycle ages, following years of record-setting bond issuance, there are growing concerns about signs of stress in corporate balance sheets,’ the IIF said. It said there was a double threat. While emerging markets had seen a five-fold increase in corporate debt to $25tn (17.32tn, 21.91tn) over the last 10 years, developed markets such as the US and Europe were seeing record junk bond issuance.
Referring to the US, the IIF said companies were borrowing as if there was no tomorrow even though their profits began to decline in 2014. It said the ratio of net debt to earnings (EBITDA) for companies was at 1.4. This had doubled since the 2007 subprime bubble, according to The Telegraph.
This post was published at David Stockmans Contra Corner on May 9, 2016.
Recent Comments