Macroeconomics

Snippets on the big picture.

Macroeconomics

HY Maturity Wall

  • “The chart below shows the substantial amount of debt to roll over in the next 2 years with  $127bn, or circa 12% of the market’s outstanding debt, being due for US HY companies. In Europe, maturity walls are even steeper, with €97bn of debt (23% of the index) maturing in 2024/2025. Add in 2026 maturities, and the refinancing wall shoots up to just to under 50% of the market. Historically speaking, this is likely to become the largest refinancing effort for HY issuers since the GFC (2008), and while some companies have already begun doing their homework, we expect it to become a key theme in 2024, particularly if base rates and borrowing costs remain elevated.”
  • Unlike GFC, as M&G points out, the situation is better – (1) new issuance is open (2) rates are lower despite the spike (3) quality is better.
  • Source: M&G.
Macroeconomics

Small Business Tax Refund Boost

  • “Recently, the IRS has accelerated payouts from a pandemic-era tax benefit known as the Employee Retention Credit (ERC). We estimate over $220 billion has been disbursed so far ($130 billion this fiscal year) and data on outstanding claims suggests there’s at least another $120 billion yet to be distributed. The use (and in some cases abuse) of this benefit should provide a meaningful tailwind for small business balance sheets and consumption through the end of the year and into 2024.“
  • h/t Redubrn,
Macroeconomics

China Strike Tracker

  • A very handy tool that tracks strikes in China – both statistics and as a map.
  • Latest monthly numbers have seen a spike.
  • “Worker strikes have reached a new height after the pandemic,” Aidan Chau, a researcher at CLB, told Nikkei Asia. “Many protests are related to slowing demand in international trade.” (Nikkei Asia).
Macroeconomics

German Political Risk

  • The rise of the AfD (the right-wing populist party) in German polls has been remarkable.
  • With elections looming in October 2025, this political risk will soon be on investor’s horizons.
  • In this context, this interview with Wolfgang Munchau, former co-editor of FT Deutschland, is a must-read to understand the woes of Europe’s largest economy and how these reflect in politics.
  • Interestingly he highlights another possible surprise on the left political spectrum – “there may soon be a party on the Left led by Sahra Wagenknecht, a very sort of maverick politician, who has left or who is on the verge of leaving the Left Party, who may be forming a new party of the Left. And that party was also on opinion polls at potentially 20% of the electorate.”
Macroeconomics

Unusual Decline in Net Interest Payments

  • Despite the sharp rise in Fed Funds rate, company net interest payments have actually fallen.
  • “We have concluded that a sizeable proportion of huge, fixed-rate borrowings during 2020/21 still survives on company balance sheets in variable rate deposits. Companies have effectively played the yield curve in reverse and become net beneficiaries of higher rates, adding 5% to profits over the last year instead of deducting 10%+ from profits as usual.” 
  • Source: Soc Gen (via themarketear).
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