Tough Times Ahead for Junk Bond Issuers

It’s not just Uncle Sam’s enormous debt that will cause problems down the road.

A squeeze on junk bonds is likely to put some companies out of business in coming years. Odds are they won’t be able to refinance maturing speculative grade debt.

Right now, it’s not a particular worry. Call this the calm before the storm. Investors are buying issues of junk bonds, and the share of companies defaulting on their debt payments will be only around 4% by the end of this year. That’s well below the recent peak of 14%. Today’s low interest rates and moderate economic growth are promoting stability in the credit markets.

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Jerome Idaszak
Contributing Editor, The Kiplinger Letter
Idaszak, now retired, worked on The Kiplinger Letter as its economics writer for 21 years. Before joining Kiplinger in 1992, he worked for 15 years with the Chicago Sun-Times, including five years as a columnist and economic correspondent in the Washington, D.C., bureau, covering five international economic summit meetings. He holds bachelor's and master's degrees in journalism from Northwestern University.