- US nonfinancial businesses debt surged a record annualized 18.8% in the first quarter, according to a Thursday report from the Federal Reserve.
- A jump in loans and corporate bond issuance pushed total US nonfinancial business debt to $16.8 trillion, higher than the level of household debt.
- Companies likely boosted their debt in preparation of riding out a downturn sparked by the coronavirus pandemic.
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US nonfinancial business debt surged by a record amount in the first quarter of the year as companies loaded up on loans and corporate bonds to protect against economic fallout stemming from the coronavirus pandemic.
Company debt spiked an annualized 18.8% in the first three months of 2020, according to a Thursday report from the Federal Reserve. An increase in loans and corporate bond issuance pushed total US nonfinancial business debt to $16.8 trillion in the quarter, surpassing the $16.3 trillion of household debt.
At the same time, the coronavirus pandemic-induced stock market rout took a bite out of household net worth, which fell the most on record to $110.8 trillion from $117.3 trillion in the previous period. The market has since rebounded strongly from March lows, signaling that net worth may in large part recover in the second quarter.
Federal government debt jumped an annualized 14.3%, from a 3.8% annualized rate in the prior quarter.
Read more: Famed short-seller Andrew Left lays out his methodology for finding the stock market’s weakest links — and says he’s terrified of newbie day-traders that think they can outsmart Carl Icahn and Warren Buffett
Surging debt and falling net worth come as the longest US expansion on record ends — on Monday, the National Bureau of Economic Research officially declared that the US is in a recession, spurred by the coronavirus pandemic.
The Federal Reserve in March slashed interest rates to near zero, which helped encourage the spike in corporate borrowing as businesses prepared for the pandemic.
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