Worst Spate of Downgrades Since 2021 Signals Pain

(Bloomberg) – Credit rating decreases become more frequent, questioning new questions about whether companies are starting to perform worse and are as high as corporate debt values.

JPMorgan Chase & Co. According to their strategists, in the second quarter, a high -$ 94 billion US debt was reduced compared to an upgrade of only $ 78 billion. JPMorgan strategists, including Eric Beinstein and Silvi Mantriy, wrote this week, increasing the upgrade increases since the beginning of 2021 since the beginning of 2021, and more companies were under the risk of decreasing economic uncertainty.

The economy is unknown, including whether trade wars will continue to increase. However, corporate bond values are high, this week, US investment class spreads are around 0.8 percent, well below an average of approximately 1.5 percent. For insignificant securities, the spreads are closer to approximately 2.8 points, dating 20 years ago of the average of 4.9 percent. This makes it very important to choose the right bonds.

“Credit collection is now very important. You should make your calls correctly,” he said in an interview. “The vulnerability to the fall is higher.”

Now there are other reasons to worry about credit quality. According to Oksana Aronov, JPMorgan Asset Management, high -efficiency borrowers globally globally delay approximately 9% globally, more than 4% in 2020. And the cash balances in high -graded US companies have started to decrease. The second quarter earning season starts in the US next week and will give more ideas about how companies are moving.

According to the Pacific Investment Management Inc., which supervises 2 trillion dollars, the Sonali Pier, a multi -sectoral credit portfolio manager in PIMCO, has been careful in the risk of borrowings such as retail or metal builders and cars. Banks and pipeline companies and health, public services and defense sectors such as strong free cash flow and earnings, such as the growth tendencies will continue to benefit from the sectors.

Pier We have kept a slight footprint in the areas where we anticipate the risk of further decrease in the market and the risk of falling angel, ”Pier said.

Many investors are optimistic that company loans will usually remain strong. In general, US institutional returns are higher than the standards of the last decade. Portfolio executives in the USA and Europe sell default protection at a speed that is a signal with little risk on the horizon. The main investment class US credit assumption positions on the swap index are over 105 billion dollars in at least three years based on data compiled by Barclays PLC and Bloomberg. A similar story in Europe.

However, at least with some measures, including companies that have lost their investment status, not at least rating drops, at least with some measures, the appearance deteriorates. JPMorgan strategists, in the second quarter, said there were approximately 34 billion dollars of debt, known as falling angels, or insignificant bonds compared to the stars rising only $ 3 billion. And on Friday, US President Donald Trump threatened a 35% tariff in some Canadian goods and increased trade discourse.

“Businesses are not vulnerable to tariffs, but also with uncertainty,” said Christina Padgett, the chairman of the leveraged Finance and Special Credit Survey in Moody’s ratings. “For many businesses, what their destiny is not confirmed.”

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