US Corporate Borrowing Costs Hit Highest Levels Since 2020

A sharp sell-off in US government bonds has pushed corporate borrowing costs to their highest levels since May 2020, causing American companies to delay or restructure financing plans. Borrowing costs for companies with the lowest credit ratings reached 17% this month, while the risk premium for those rated triple C or lower hit its largest spread since 2022. The 10-year Treasury note recently reached its highest yield since 2002.

Bank of America responded to the volatility by lowering its forecast for dollar-denominated investment-grade debt sales this month to $110 billion. The market shift has forced companies like McCormick to re-evaluate debt financing strategies for upcoming mergers, with some deals being pulled as investors become more selective. Marcos Gabriel, Chief Financial Officer of McCormick, stated that the company is staying close to market dynamics to evaluate its debt financing strategy.

These developments occur as Moody's Ratings estimates a record $1.45 trillion of US investment-grade corporate debt will mature between 2026 and 2030. Meanwhile, futures traders expect the Federal Reserve System to raise interest rates three or four more times by early 2028.