How Long Before The Fed Bill Comes Due For Corporates?
How long before the most aggressive rate-hiking campaign in a generation finally bites corporates?
It's an ad nauseam question. In some sense, it's rhetorical. We know the answer because we've all seen the charts.
A snapshot of funding mix (fixed versus floating) and maturity walls (termed-out versus steep) makes it obvious: The answer is "yesterday" for smaller companies (and particularly for very small, non-public businesses) and "probably never" for the largest of the large, with a caveat t
I traded only hedged positions for most of my career. The mythology was that they were true hedges. I was taught any r squared below 95 meant you didn’t have a proven relationship. I never had a risk manager call me out on this. My view is trading is riskier than even experienced participants realize. Gambling is a dirty word that isn’t really dirty. I once had a ceo describe my business as riskless arbitrage. Oh really?
Seems like CRE -> banks is worth paying attention to as well
I wonder whether, like most things post-pandemic, that lagged net interest line will follow the real Fed rate line as quickly or closely as it has typically in the past. Seems like the IPO drought and SPAC meltdowns may have already put a decent dent in the zombies and other marginal borrowers. (The cynic in me notes that no matter what the interest rate, interest costs won’t increase on enterprises that go defunct before the bill comes due). Moreover, with equities pushing to new highs, M&A and IPOs may relieve some debt squeezes.
But the only bet I’d lay is that corporate America as a whole, flush with inflation-aided record profit margins, will not hesitate to use higher interest rates (if not costs) as a rationale to further raise prices.