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Credit bureaux are raising debt for hundreds of billions of US corporations, with a slight reversal of the initial decline in the epidemic that shows a dramatic increase in profits for many American companies.
About $ 361bn of high-rated, bond grade bonds have been adjusted over the past two months, including a record $ 184bn in June, according to a study by Bank of America.
Rapid exposure shows credit unions such as S&P Global, Moody’s and Fitch believe that the economic recovery resulting from vaccinations has led to a large number of corporate groups being regulated. It also reflects the high level of borrowing and the lowest rental rates available to most companies, among others due to increased funding from the Federal Reserve.
“I don’t think you would have expected vaccination, economic growth, and strong access to really low-cost loans,” said Christina Padgett, vice president of Moody’s Corporate Finance Group.
Accounting agencies, which were punished in the wake of the 2008 financial crisis for providing less disrupted funds, moved swiftly during the epidemic to reduce their scrutiny at higher interest rates.
The average $ 1tn of credit to a US business was to cut in March and April 2020, which BofA showed, approximately $ 7.6tn in value.
The U.S. economy, which fell 3.5% last year, is expected to grow by about 6.6% in 2021, according to a Bloomberg economic study. Benefits of S&P 500 companies are expected to rise more than 60% in the second quarter from the same period last year, when economic activity was suspended, according to a Refinitiv report by analysts.
Just as optimism thrives on financial performance, so do companies with low risk risks. Analysts at Citigroup predict that $ 200bn of corporate debt will reach the end of 2022. In the past, $ 18bn has already been set up on the ladder until this year, bank data shows.
“It’s like I didn’t see my time [in the industry], “Said Michael Anderson, a debt specialist at Citigroup.” After the financial crisis, big companies did not immediately return to business. “
In recent months, voting companies have rejoiced regular rental rates, and even the more affluent groups are more likely to earn more than they earn.
The move has been criticized by experts and those who believe that cutting last year was an unmistakable response to the plague.
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“Getting off the ground was probably very difficult,” says Yuri Seliger, a banking expert at Bank of America.
However, major corporations reject this idea, saying that many countries experienced difficulties last year. Emily Wadhwani, managing director of Fitch Ratings, said they were “active in their investigation” as they were involved in the epidemic.
Strategists at Moody’s said that about three-quarters of the total population that fell in the early stages of the epidemic affected companies that were already suffering, and found that the financial crisis and businesses at risk of the epidemic were also drivers.
“No one felt like March, April, May [last year] that the market is coming back to roar, “says Padgett,” and all these weak companies will suddenly have all the debt they need and then some. “
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