Main Topic: Americans' credit card debt reaches over $1 trillion for the first time ever.
Key Points:
1. Total credit card indebtedness rose by $45 billion in the April-through-June period, reaching $1.03 trillion.
2. Credit card delinquency rates have increased, with 30 or more days late climbing to 7.2% in Q2.
3. The rise in credit card balances reflects inflationary pressures and higher levels of consumption, while household income remains below pre-pandemic levels.
### Summary
Investors are looking to put their cash into junk assets as fears of a severe US recession recede, leading to increased demand for high-yield markets and borrowers taking advantage of refinancing and amend-and-extend transactions.
### Facts
- There is an excess demand for high-yield markets due to limited issuance, resulting in borrowers having more flexibility through refinancing and amend-and-extend transactions.
- The amount of high-yield credit due in 2025 has decreased by almost 12% since the start of 2023.
- US GDP growth is expected to increase, leading to Morgan Stanley lowering its base case for US junk and loan spreads.
- Safer companies are holding back from taking advantage of the rally, anticipating lower borrowing costs in the future.
- Risk appetite has softened due to concerns over higher interest rates, leading to a two-speed economy and potential challenges for companies with high levels of leverage.
- The private credit market set a record with the largest loan in its history, and several other notable financial transactions have taken place in the week.
- There have been personnel changes in various financial institutions, including Credit Suisse, Canada's Bank of Nova Scotia, and Santander.
The number of corporate bankruptcies in the US is increasing at the fastest pace since 2010, with over 400 corporations going under so far in 2023, reflecting overstretched balance sheets and rising interest rates.
Around $1.2 trillion of debt on US commercial real estate is considered "potentially troubled" due to high leverage and falling property values, with office spaces being the most affected and accounting for over half of the at-risk debt that will mature by the end of 2025.
Despite reaching record levels of total credit card debt and household debt, Americans are actually managing their debt better than in the past due to inflation masking the impact on balances and lower debt-to-deposit levels, according to an analysis by WalletHub. However, the rising trajectory of credit card debt and the increasing number of households carrying balances raise concerns, especially considering the high interest rates, which can take more than 17 years to pay off and cost thousands of dollars in interest. Meanwhile, savers have the opportunity to earn higher returns on cash due to higher inflation and interest rates.
Consumer debt, including auto-loans and credit card balances, is increasing in the United States, but strong government intervention and temporary relief measures have created a cushion of extra cash savings, leading to a positive outcome for Bitcoin (BTC) according to Cointelegraph analyst Marcel Pechman.
The US government's debt has reached a record high of almost $33 trillion, causing concerns about its impact on the nation's finances and the risk of a debt crisis, according to experts like Larry McDonald, Ray Dalio, and Nouriel Roubini.
The second quarter of 2023 saw a consistent rise in borrowing among Canadians, with subprime borrowers experiencing the highest increase in credit balances due to higher spending habits and elevated interest rates on variable-rate loans. Demand for new credit also grew significantly, leading to a total Canadian household debt of $2.3 trillion.
Americans facing high prices and interest rates are struggling to repay credit card and auto loans, leading to rising delinquencies and defaults with no immediate relief in sight, particularly for low-income individuals, as analysts expect the situation to worsen before it improves.
The debt of the United States has reached record levels and continues to grow, raising concerns among investment gurus and market minds about its long-term consequences on the economy and financial markets.
Top economist David Rosenberg predicts that the US will experience a recession within the next six months due to the aggressive interest rate hikes by the Federal Reserve and the erosion of credit quality in credit card debt.
Americans are struggling to pay their bills as inflation rises, leading to a surge in credit card and auto loan defaults, which is expected to worsen with rising interest rates and the expiration of the student loan moratorium. Low- and middle-income earners are particularly affected, resorting to using credit cards for essential purchases, while opening new lines of credit to pay off debts, resulting in record-high credit card debt. The resumption of student loan payments and potential holiday season spending add to concerns about escalating debt levels.
China's housing crisis has led to a record number of defaults among the country's private developers, with 34 out of the top 50 developers experiencing delinquencies on offshore debt, and the remaining 16 facing a combined $1.48 billion of bond payments in September, raising concerns about a potential bond default by industry giant Country Garden and the potential ripple effects on the broader economy and social stability.
Oaktree Capital Management co-founder Howard Marks predicts that more companies will default on their debt due to higher interest rates making it difficult for struggling companies to raise capital.
US companies' financial health improved in the second quarter of 2023, with higher cash ratios and reduced debt-to-equity ratios, while US private auto insurers are increasing premium rates to offset poor underwriting results, and the US office real estate sector faces a higher risk of loan defaults and delinquencies.
Bankruptcies have increased by 17% in August, marking the 13th consecutive month of rising company failures, as businesses struggle to cope with the Federal Reserve's interest-rate hikes.
The U.S. debt is expected to reach $2 trillion this year, doubling from the previous year, due to a decline in global economic growth.
U.S. consumers have accumulated $43 billion in additional credit card debt during Q2 2022, three times the average amount since the Great Recession, and credit card interest rates have soared to over 20%, raising concerns about the impact of inflation and rising interest rates on consumers' ability to pay off their balances. However, some economists argue that higher wages are helping consumers keep pace with their debt, and the overall rate of charge-offs remains low. Nonetheless, the combination of spent-down pandemic savings and the resumption of federal student loan payments could pose challenges for lower-income borrowers and hinder consumer spending.
Despite increased household wealth in the US, millions of households are struggling financially due to inflation, high interest rates, and rising living costs, which have led to record levels of debt and limited access to credit.
The number of new corporate defaults globally reached a high in August 2021, indicating increasing corporate stress due to aggressive rate hikes and looming debt maturities.
The US is facing a potential financial crisis as the national debt reaches $33 trillion and the federal deficit is expected to double, posing a threat to President Biden's government and potential consequences for American citizens.
Leading market experts are raising concerns about the growing US debt, warning that it will lead to higher interest rates and potential economic repercussions as federal deficits increase and US debt supply continues to grow.
US high-yield issuers could face a surge in defaults if inflation continues to accelerate, with a 5% inflation rate potentially causing a full-scale default wave, according to Bank of America Corp. credit strategist Oleg Melentyev.
The US's $32 trillion debt may not be as dire as it seems, as experts point out misconceptions about the national deficit and its impact on the economy. However, future debt problems could arise due to current spending rates.
The real estate crisis in China has caused bond default rates to increase in the Asia-Pacific region, with defaults occurring more quickly than globally despite Asia's better credit rating.
Rising interest rates caused by the steepest monetary tightening campaign in a generation are causing financial distress for borrowers worldwide, threatening the survival of businesses and forcing individuals to consider selling assets or cut back on expenses.
The US national debt has reached a record high of $33 trillion, prompting the need for leaders to decide whether to raise the debt ceiling, as inflation continues to rise and there is a looming government shutdown.
Global debt reached a record $307 trillion in Q2 2023, driven by the United States and Japan, despite rising interest rates hampering bank credit, according to the Institute of International Finance (IIF).
Credit card company losses in the US are increasing at their fastest pace in nearly 30 years, driven by rising consumer debt and delinquencies, with losses projected to peak in late 2024 or early 2025, according to Goldman Sachs.
US credit card debt reached $1 trillion for the first time, but experts argue that it is not a cause for concern as factors like income, wealth, spending growth, credit card utilization, and delinquency rates indicate that consumers are in good financial shape unless the US enters a severe recession.
American household debt has reached record levels in the second quarter of 2023, as Americans have taken on more debt amidst diminishing savings and high interest rates.
The federal debt, which has reached over $33 trillion and is increasing, is predicted to cause a crisis in the near future, leading to high inflation, lower profits for companies, and potential stock market problems, highlighting the importance of diversifying investments.
The cost of servicing the US debt is expected to reach a new record by 2025, as higher interest rates increase borrowing costs and push interest payments on the debt to $10.6 trillion over the next decade.
The national debt of the United States has reached a historic high of $33.44 trillion, with the amount of daily debt added surpassing the market capitalization of most cryptocurrencies, including Bitcoin and Ethereum. The rising cost of servicing this debt is projected to hit a new record in 2025, and estimates suggest that the national debt-to-GDP ratio could reach 181% by 2053.
Despite efforts by Federal Reserve Chair Jerome Powell to curb borrowing and spending habits, many American companies, both investment-grade and sub-investment grade, have continued to borrow more money, potentially indicating that interest rates may need to be raised even higher to effectively break the cycle. Increased borrowing has raised concerns about the financial health and stability of businesses, with indicators of companies' ability to make payments deteriorating. The borrowing spree is primarily a North American phenomenon, as European and Asian companies have added far less debt or decreased their borrowing.
America's gross national debt has reached a record $33 trillion, surpassing its spending on national defense, and the rising interest rates will further worsen the situation.
The US government's debt has increased by over half a trillion dollars in just three weeks, leading to warnings from Senator Cynthia Lummis and billionaire Ray Dalio about the potential consequences for future generations.
A wave of corporate bankruptcies and debt defaults, driven by high interest rates, could potentially push the US economy into a recession, as global corporate defaults reach their highest levels since 2009 and borrowing costs for firms significantly rise.
The rapid increase in Treasury yields has heightened concerns about potential defaults in emerging markets, with several countries at risk of missing payments or being forced to restructure their heavy debt loads.
U.S. bankruptcy filings in September indicate that 2023 may surpass 2020 as the worst year for corporate bankruptcies in over a decade, with more filings than in 2021 or 2022, as concerns about a potential recession emerge.
The cost of financing America's debt is rising as bond yields increase, potentially crowding out other spending and surpassing the amount spent on defense by 2028, according to estimates released by the Congressional Budget Office.
The US's $33 trillion debt pile is reflecting "unsustainable" fiscal policy, according to the IMF, as the country faces the highest corporate default rates since 2009.
US corporate bankruptcies are increasing due to higher interest rates set by the Federal Reserve, leading to higher borrowing costs and putting pressure on companies with high levels of debt.