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Republican Tax Reform Seen Shrinking Corporate Bond Market

  • Loss of interest tax deduction may damp debt financing
  • Company credit quality may improve as market shrinks by third
Updated on

A little-noticed element of Republicans’ planned tax reform could slash the size of the U.S. corporate bond market by as much as a third, according to one bank’s estimate.

President-elect Donald Trump and congressmen from his party have both suggested cutting corporate tax rates. To pay for those reductions, the House Republicans’ plan calls for eliminating a key tax benefit associated with companies’ borrowing, namely the right to deduct interest payments from income.