As the Fed raises rates, companies with floating rate debt have higher debt servicing costs, and companies refinancing their debt will pay higher interest rates, see charts below.
The good news is that many companies during the pandemic have termed out their debt into later years, and just 9% of fixed-rate debt is scheduled to mature by the end of 2023.
High yield debt usually is more vulnerable to rising interest rates, but high yield only makes up 19% of US corporate debt maturing by the end of 2023.
With the consensus expecting and the market pricing that Treasury yields will peak by the middle of 2023, the bottom line is that the maturity wall looks manageable for both IG and HY.
Source: S&P Global Ratings Research, Apollo Chief Economist. Note: Data as of July 1, 2022. Includes issuers’ investment-grade bonds, loans, and revolving credit facilities that are rated by S&P Global RatingsSource: S&P Global Ratings Research, Apollo Chief Economist. Note: Data as of July 1, 2022. Includes issuers’ speculative-grade bonds, loans, and revolving credit facilities that are rated by S&P Global Ratings.
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