UBS – Excessive Leverage in US Corporates

Seeking, at the very least, inflation-beating returns in a persistent low interest rate environment has meant fixed income investors have turned to more creative, arguably riskier, investment allocations over the past few years. Famed for their commensurate risks, US junk bonds and leveraged loans soared in volumes through 2017 – buoyed by Trump at the helm. However, recent research from UBS argues that US corporate balance sheets should be more closely scrutinised for less prominent levels of risk. Specifically, excessive leverage may be creating credit imbalances that many investors are currently overlooking in a myopic pursuit to capture return.1 Calm…