Junk Bond Yields Are Back Above 15%: 10 Stocks In The Pressure Zone
Higher interest rates are not crushing corporate America uniformly. They are imposing a refinancing tax on weaker borrowers that loaded up on cheap debt some years ago. Yields on the riskiest U.S. junk bonds have climbed back to 15%, eyeing their fifth straight week of surge and reaching the highest levels since November 2022. Apollo’s chief economist Torsten Slok sent a stark warning on Friday. “Higher for longer is a slow squeeze for low-quality credit,” Slok said in a note. Chart: CCC-Rated Corporate Yield Hits 15.8%, Highest Since 2022 Higher For Longer Hits The Weakest Borrowers First The pressure increased this month. The Federal Reserve raised its policy rate by 25 basis points in September, taking its target range to 3.75%—4.00%. The effective federal funds rate stood at 3.88% on Sept. 23. Markets assign a 68% chance of a new hike next month and a 48% of an additional hike in December. Higher rates matter most when companies need to replace old debt. In 2021 and 2022, weaker companies borrowed when money was cheap. Much of that debt now comes due. "Every month rates stay elevated, more CCC borrowers from the 2021—22 vintages hit the refinancing wall with less cash to servic
Higher interest rates are not crushing corporate America uniformly. They are imposing a refinancing tax on weaker borrowers that loaded up on cheap debt some years ago. S. junk bonds have climbed back to 15%, eyeing their fifth straight week of surge and reaching the highest levels since November 2022.
Apollo’s chief economist Torsten Slok sent a stark warning on Friday. “Higher for longer is a slow squeeze for low-quality credit,” Slok said in a note. 8%, Highest Since 2022 Higher For Longer Hits The Weakest Borrowers First The pressure increased this month. 00%.
88% on Sept. 23. Markets assign a 68% chance of a new hike next month and a 48% of an additional hike in December. Higher rates matter most when companies need to replace old debt.
In 2021 and 2022, weaker companies borrowed when money was cheap. Much of that debt now comes due. "Every month rates stay elevated, more CCC borrowers from the 2021—22 vintages hit the refinancing wall with less cash to service their debt," Slok said. ” According to Slok, the pain is sharpest in heavily indebted, private equity-backed technology, healthcare and consumer discretionary companies.
Those are the sectors where floating-rate debt, thin margins and disruption from artificial intelligence leave the least room to absorb years of expensive borrowing. Strong companies are in a different position. They locked in cheap fixed-rate debt years ago and have barely noticed the Fed’s tightening. 10 Public Stocks Inside XCCC’s Biggest Issuers The broader BondBloxx CCC Rated USD High Yield Corporate Bond ETF (NYSE: XCCC ) offers a useful map of where CCC-rated debt is concentrated.
-listed companies with bonds in the fund together carry about $97 billion of debt, roughly 10 times their combined stock market value of about $10 billion. Company Total debt Market cap YTD change Hertz Global Holdings Inc. 9% iHeartMedia Inc. 7% Optimum Communications Inc.
0% B&G Foods Inc. 8% Medical Properties Trust Inc. 0% Six Flags Entertainment Corp. 2% Sinclair Inc.
7% Community Health Systems Inc. 7% Xerox Holdings Corp. 3% AMC Entertainment Holdings Inc. 5% Read Also: EXCLUSIVE: Micron's AI Earnings Could Break the Old Memory Cycle, PurePlay ETFs CEO Says