Bond Mountaineers Easily Scale the Maturity Wall
Looming maturities of high-yield debt appeared scary. But they are being extended without difficulty, and credit spreads are narrowing.
The hand-wringing about the Great Maturity Wall appears to have been wildly overdone.
Photographer: Emmanuel Dunand/AFP/Getty Images
If you take your signals from the corporate bond market, the world looks much less scary than it did a few months ago. These days, high-yield US bonds yield just 378 basis points over Treasuries, more than 2 percentage points below the 2022 high and close to the narrowest gap since the Federal Reserve started raising interest rates last year. Some of that reflects the vagaries of investor sentiment, no doubt, but there have been some encouraging developments to suggest the trend just may be justified.
First, the hand-wringing about the Great Maturity Wall appears to have been wildly overdone. A year ago, the bear case held that interest rates were rising and the economy was deteriorating at the same time that a surfeit of high-yield debt was coming due. But ever since that point, companies have been quietly extending their debt calendars. At the start of 2023, high-yield issuers had about $878.4 billion in significant dollar-denominated bond and loan issues coming due through 2025. And since then, issuers have whittled the number down by about 38% to $542.3 billion. Most signs suggest they will continue to make plodding progress.