JPMorgan Chase & Co. reports a surge in US corporate bonds on the brink of junk status, totaling $63 billion, up from $37 billion in 2024. Despite strong demand and earnings, risks persist as companies face potential downgrades due to rising interest expenses. Market turmoil is not anticipated, but concerns remain.
Credit risk is heightened as $55 billion of US corporate bonds transitioned to junk status in 2025, surpassing the $10 billion of firms upgraded to high-grade. JPMorgan predicts this trend will continue, with BBB- debt at a record low share. Rising indebtedness relative to earnings poses a threat, despite current strong bond demand.
Investors are advised to avoid companies taking on excessive risk through capex or M&A, according to PGIM Fixed Income. Amid the busiest start to global bond sales, President Trump directs Fannie Mae and Freddie Mac to buy $200 billion in mortgage bonds. Saks Global Enterprises seeks a loan to continue business operations amidst a potential Chapter 11 filing. China Vanke Co. prepares a debt restructuring plan at the request of authorities, while First Brands Group Inc. faces cash shortages and legal challenges.
Warner Bros. Discovery Inc. rejects a takeover offer from Paramount Skydance Corp., expressing skepticism about the largest leveraged buyout in history. A $7 billion loan is offered for Blackstone Inc. and TPG Inc.’s acquisition, alongside leveraged loans for Finastra Group Holdings Ltd. and Hillenbrand Inc. Charter Communications Inc. and Six Flags Entertainment Corp. issue junk bonds, while Royal Bank of Canada and Deutsche Bank AG pre-market debt tied to Investindustrial’s takeover of TreeHouse Foods Inc.
In personnel news, Wells Fargo & Co. appoints Danny McCarthy to lead the credit franchise in its capital-markets business. MissionSquare names Yulia Alekseeva as head of fixed income, and Ares Management Corp. hires Gabriel Fong as partner for Asia credit. Bond market veteran Jean-Luc Lamarque departs Credit Agricole SA after nearly 30 years.
Read more at Yahoo Finance: More Bonds Are Teetering on the Brink of Junk: Credit Weekly