In “Will Fed Hikes Catch Up To Corporates After All?” I wondered if the much-discussed maturity wall reckoning might yet come for junk-rated borrowers given the likelihood that the cost of capital will remain elevated for quite a while, even if the Fed goes ahead with a token number of so-called “insurance cuts” later this year.

The linked article was short. This one will be too. This is just me finishing the thought.

As most readers are surely aware, it’s been a banner year for corporate supply so far: More than $552 billion across high-grade and junk, as illustrated below.

That’s — umm — a lot. And the good news is, it suggests the doors are open. Wide open, in fact, amid 2024’s risk-on mood and a never-ending streak of inflows to high-grade credit funds.

According to BMO’s Daniel Krieter, this was the second-heaviest pre-Easter week for the IG market ever, “trailing only the extraordinary environment of 2020.”

The corollary (I won’t call it “bad” news, as I’m not sure that’s entirely accurate) is that while spreads have come in sharply from the wides, that’s only part of the equation: Corporate bond yields are dramatically higher than they were three years ago, and indeed much higher than they were for most of the post-Lehman period.

With that in mind, the figure below plots the weighted average coupon versus Fed funds. The former’s drifting up, but the chart suggests we’re still in… well, uncharted waters (sorry, bad joke).

“More debt needs to roll at these high levels for further monetary policy transmission,” SocGen’s Jitesh Kumar and Vincent Cassot wrote this week.

As for whether that’s foreboding, SocGen thinks probably not. “This is already happening given a busy corporate issuance calendar so far, but it is a slow and steady process rather than a big risk-off event,” Kumar and Cassot said, speaking to the notion that even with heavy supply, average, overall corporate borrowing costs aren’t going to reset higher all at once, overnight.

“Moreover, the availability of private credit has arguably helped on the margin,” they added.