It’s fair to say that $12.3 trillion of stimulus seems to have killed off the U.S. credit default cycle. Almost all fear of bankruptcy has been obliterated from debt markets even though the global economy is still struggling under the worst health crisis in a century.
The simplest way to see this is quite basic: The lowest-rated companies are enjoying the cheapest borrowing costs in history. All-in yields on corporate debt rated triple-C and below have fallen to about 8% from as high as 20.2% as recently as March 2020, ICE Bank of America index data show. Investors have raced one another to lend billions of dollars to cruise companies and airlines even as they bleed cash. The amount of U.S. junk-rated debt included in the Bloomberg Barclays U.S. High Yield bond index has surged to a record face value of $1.53 trillion from $1.2 trillion in October 2019.