More Zombies Stalk the U.S. Corporate Bond Sector

The proportion of highly-indebted but unprofitable U.S. companies has escalated since the pandemic began. Some worry that there is a growing mass of pent-up corporate defaults that represent a ticking time bomb for the U.S. financial system, a biproduct of years of ultra easy monetary policy. The chart shows that the proportion of zombies has indeed increased over the past year, but only to near the long-term mean. This does not constitute a systemic risk, although the U.S. may only be in the early innings of a major corporate leveraging cycle. Near term, the surge in oil prices provides some interesting opportunities in zombie energy company bonds.

October 31, 2021

TRIAL ACCESS

Alpine Macro research is available to qualified investment professionals on a complimentary evaluation basis. If you’d like to request trial access, please complete the form below.