WORLD ECONOMY: FLIRTING WITH DANGER

Record Bond Issues Heighten Fears of Debt Collapse
In 2019, corporations globally took advantage of low interest rates and issued $2.5 trillion in bonds during the year, nudging past 2017’s record number.
According to the World Bank, while central banks are eager to keep rates low to stave off a recession, their cheap money policies have created a chasm of debt that’s the “largest, fastest, and most broad-based” since the 2008 recession.
Low interest rates have coaxed lower-rated companies to flood the market with bonds. Poor performance among many of them has led investors to put money into additional risky bonds to try to stabilize their portfolios’ returns.
The bank has warned that the greater the debt burden becomes, the more vulnerable economies are to shocks. Emerging nations’ economies are particularly precarious.
The trend isn’t slowing. In early January, the bond market took in $69 billion of new debt in a single week, the second-largest weekly total in history.