Are Corporations Really De-leveraging? Chart Busts Myths

 

deleveragingYou cannot go anywhere these days without talk of de-leveraging.  Basically the talk that the private sectors, both corporations and individuals, are living within their means, saving more, and taking on less debt. However, I started to doubt this idea of a massive de-leveraging taking place, when I saw headlines about the record amounts of corporate bond issues coming to market.
 

To see a list of high yielding CDs go here.

 
Just because there is a lot of corporate debt coming to market does not mean that there is more corporate debt. For example, refinancing maturing debt and existing debt at lower interest rates could be causing a rise in the issuance of debt, without the total amount of debt outstanding increasing.

The amount of US corporate debt is increasing at the same time more corporate debt is coming to market.

 

Is this really deleveraging?

New issuance of US corporate debt will hit an all time high this year. The last time we were at these levels was during the euphoric time of 2007.

(2012 number is an estimated on the first 10 months of data)

US Outstanding Corporate Debt Is At Record Levels

In the first half of 2012, the amount of outstanding debt increased by $270 Billion.

(number for full 2012 is an estimate)

 

Learn More:

Can we trust corporate bond credit ratings
Convertible Bonds vs. Preferred Stocks
How credit spreads change over time
How to trade corporate bonds with E*Trade

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