A record $42 billion worth of U.S. corporate bonds have fallen into junk territory this year — the highest total in a decade — and it’s shaking confidence across Wall Street. The downgrades, known as “fallen angels,” have surged nearly sevenfold from last year’s $6 billion, marking one of the sharpest deteriorations in corporate credit quality since the pandemic. Investors are now asking a serious question: Is this the early signal of a corporate debt crisis in the making?
The warning signs are hard to ignore. U.S. companies loaded up on cheap debt during the low-rate era, locking in trillions in loans. Now those debts are turning heavy as interest rates stay elevated and profit margins shrink. Bonds once rated investment grade are slipping to speculative status, and the shift is happening faster than markets expected. It’s a clear sign that corporate leverage has peaked, and the era of easy money is over.
The mechanics…
