What are the reasons for concern?
US corporate earnings have gradually declined since January 2015. Back to back quarters of shrinking bottom-line figures has coincided with rising stock prices and corporations taking on more debt. In a low interest environment, corporations have loaded up on 'cheap debt' with a tendency to use those funds for stock buybacks. Andrew Lapthorne, global head of quantitative strategy at SocGen states, "In many cases, companies have used debt to repurchase their own stock, flattering their bottom-line financial performance." While not all buybacks are financed by debt, Lapthorne did note a correlation between net repurchases and the change in corporate indebtedness. U.S. Corporate balance sheets are a major risk going forward. “U.S. corporates are massively overspending.”
How much has US Corp Debt grown and who are the key players?
The growth rate of US Corporate Debt YTD is 11.29%. The amount of US Corp debt outstanding on the 1st January 2016 was USD3tn. The 1st October 2016 figure is USD3.34tn. This significant growth has been fuelled by a number of high profile corporations issuing multi billion dollar notes, including Microsoft's 30 year tranche at USD4.5bn and Oracle's 5.7 year the same size. Other notable issuers include: Wells Fargo, Apple, Berkshire Hathaway and Cisco.
Where can I learn more about this sector?
To learn more about US Corporate Debt levels use the CMD Portal Data Sheet search tool with the following filters applied (see below). All Data Sheet search results can be downloaded to XLS format.
YTD US Corporate Outstanding Debt search
Report Type: By Issuer Country
Report Output Type: Outstanding
Report Currency: USD
Start Date: 1/1/16
End Date: 31/10/16
Region: North America
Country: United States
Instrument Type: Bond; MTN; Note