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Matthew A. Winkler

Corporate Binge on Bonds Defies Credit Downgrades

Credit ratings are again proving meaningless as demand for corporate debt continues unabated.

Post this: 3M sold $1.75 billion in bonds after a downgrade.

Post this: 3M sold $1.75 billion in bonds after a downgrade.

Photographer: Daniel Acker/Bloomberg

During the first quarter's financial turbulence, when the Covid-19 pandemic staggered the global economy, corporate America defied a blitz of negative credit ratings by raising a record $519 billion at the decade's lowest interest rates. Firms rated non-investment grade, or so-called junk, borrowed an additional $81.8 billion, which helps explain why shareholders recovered 49% of their March losses. Bonds are most responsive to the interventions of central banks led by the Federal Reserve and remain the surest signal of investor confidence no matter what arbiters of credit say or do.

S&P Global Ratings, operating in 26 countries, issued a mere 132 opinions of improving credit compared with 792 citing deterioration, or an upgrade-to-downgrade ratio of 0.17, according to first-quarter data compiled by Bloomberg. For every 100 S&P negative decisions, there were only 17 enhancements, the worst ratio in at least 10 years.