2020-04-01 Bloomberg Markets Magazine

North American Covenant Quality Indicator

Higher values indicate lower quality

Corporations in most of the world’s
largest economies loaded up on debt.

The Binge Was Global

Nonfinancial Corporate Debt

as a Share of GDP

Q3 2019

A Safety Net Frays

Desperate for allocations of debt with juicy yields, investors have let borrowers

strip away legal protections, or covenants, that were designed to safeguard

investments when the companies begin to run into trouble.

Pushed to the Edge of Junk

Over the past decade, as even the most creditworthy companies took on a lot of

debt, they increasingly sacrificed their once-pristine ratings. Before the pandemic,

about half of the U.S. investment-grade bond market was just a few steps from junk.

S&P Credit Ratings in the Bloomberg Barclays U.S. Corporate Bond Index

AAA AA A BBB BB

2011 2019

0

50

Netherlands 100%

163%

Switzerland

122

South Korea

101

U.S.

75

Tu r key

66

Saudi Arabia

45

France

155

Canada

115

Spain

95

Australia

73

Germany

59

India

44

Mexico

26

China

150

Japan

103

U.K.

82

Italy

69

Russia

46

Brazil

43

Indonesia

23

3/2011 2/2020

5.0

4.5

3.5

4.0

56 BLOOMBERG MARKETS