## Figure 1.8. The Key Features of the Current Corporate Credit Cycle

## Source details

**Canonical URL:** [Figure 1.8. The Key Features of the Current Corporate Credit Cycle](https://www.imf.org/-/media/files/publications/gfsr/2019/april/english/ch1data/charts/figure1-8.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/gfsr/2019/april/english/ch1data/charts/figure1-8.pdf.md)
- [Structured JSON version](/-/media/files/publications/gfsr/2019/april/english/ch1data/charts/figure1-8.pdf.json)

---

### 1. Overview
- BBB issuers’ debt-service capacity has improved but indebtedness has risen.
- The loan market has doubled in size, but investor protections and credit quality have deteriorated.
- Nonfinancial business sector reliance on capital-market financing has increased.
- Investment funds and foreign investors account for a large share of corporate bond holdings.
- The outstanding stock of BBB-rated corporate bonds has more than quadrupled since the crisis, driven by new issuance, rating changes, and new entrants.

### 2. Indicative Holdings of US and European Corporate Bonds (panel highlights)
- IG holdings $5.1 trillion.
- HY holdings $1.3 trillion.
- IG holdings composition (percent of holdings, as labeled):
  - Banks 3%
  - Mutual funds 18%
  - P&C 6%
  - Pension funds 17%
  - Corporations 6%
  - HFs 2%
  - Other 19%
- HY holdings composition (percent of holdings, as labeled):
  - HFs 14%
  - Other 8%
  - High-yield mutual funds and ETFs 21%
  - Offshore funds 3%
  - Income funds 15%
  - Insurance portfolios 13%
  - Life insurance 29%
  - Pension funds and separate accounts 22%
  - Global HY funds 4%

### 3. BBB-Rated Bonds in Investment Grade Indices (panel highlights)
- Panel shows percent shares by index over time (2005:Q1 to 2018 series) indicating a marked rise in BBB share; source text: "3. BBB-Rated Bonds in Investment Grade Indices (Percent of total; trillions of US dollars)" and "4. Evolution of BBB Corporate Bond Universe from 2009 to 2018".
- Statement: "The outstanding stock of BBB-rated corporate bonds has more than quadrupled since the crisis ... driven by new issuance, rating changes, and new entrants."

### 4. US Credit Fundamentals of BBBs: 2018 versus 2007 (panel 5 summary)
- Metrics presented as (Percent/ratio/basis points/number/percentile rank); source text notes relative deterioration in credit quality despite some improvement in debt-service capacity.

### 5. US Leveraged Loan Market Characteristics: 2018 versus 2007 (panel 6 exact figures)
- Level / Percentile / Signal comparisons for 2007 and 2018:
  - Size (as a percentage of IG outstanding): 34.6 (2007); 49.3 (2018)
  - Gross Leverage (times): 2.4 (2007); 3.0 (2018)
  - Net Leverage (times): 2.1 (2007); 2.6 (2018)
  - Share of Companies with > 4× Leverage (percent): 16 (2007); 23 (2018)
  - Interest Coverage (times)*: 7.3 (2007); 7.9 (2018)
  - EBITDA Margin (percent)*: 19 (2007); 21 (2018)
  - Gross Margin (percent)*: 35 (2007); 40 (2018)
  - Spread (basis points): 198 (2007); 121 (2018)
- Additional leveraged-loan market statistics:
  - Outstanding Leveraged Loans ($ billions): 554 (2007); 1,147 (2018)
  - US Issuance (percent of global issuance): 66.9 (2007); 75.8 (2018)
  - Covenant Quality Index: 2.6 (2007); 4.1 (2018)  (Note: a higher score represents weaker covenant protection)
  - Covenant-Lite Share (percent of new issuance): 29.2 (2007); 84.7 (2018)
  - B-Rated (percent of new issuance): 22.6 (2007); 58.0 (2018)
  - Total Debt/EBITDA (times): 4.9 (2007); 5.3 (2018)
  - First Lien Debt/EBITDA (times): 3.5 (2007); 4.3 (2018)
  - Other Debt/EBITDA (times): 1.4 (2007); 1.0 (2018)
  - Deals with EBITDA Add-Backs (percent of new issuance): 8.4 (2007); 27.1 (2018)
- Footnote: "* = Icons are reversed"

### 6. Synthesis of Key Risks and Dynamics
- Corporate indebtedness and leverage metrics have increased between 2007 and 2018 (see exact leverage and debt ratios above).
- Covenant protection has weakened materially: Covenant Quality Index rose from 2.6 to 4.1 and Covenant-Lite Share rose from 29.2 percent to 84.7 percent.
- Market size and investor composition shifted:
  - Outstanding leveraged loans roughly doubled from $554 billion to $1,147 billion.
  - US share of global leveraged-loan issuance rose from 66.9 percent to 75.8 percent.
  - BBB-rated corporate bond stock expanded substantially since 2009 through new issuance, rating transitions, and new entrants.

*Sources: Autonomous Research; Bank of America Merrill Lynch; Barclays; Bloomberg Finance L.P.; CEF Connect; EPFR Global; European Central Bank; Federal Reserve; Hedge Fund Research; ICE Bond Indices; Lipper; Moodys; SNL Financial; S&P LCD; and IMF staff estimates.*

---


_Source: https://www.imf.org/-/media/files/publications/gfsr/2019/april/english/ch1data/charts/figure1-8.pdf_