Beware the Bifurcation: Economic Resilience and Debt Dynamics

In the U.S., only 25% of corporate debt is held by floating rate borrowers, contrasting sharply with higher percentages seen globally. This disparity has resulted in significant financial performance differences between larger, cash-rich companies and smaller firms burdened with SOFR-based debt. While overall economic indicators suggest resilience, sectors like office commercial real estate (CRE) and smaller borrowers face serious challenges. Nonetheless, these struggles do not yet culminate in a widespread economic crisis, further underscoring the complexities of economic resilience tied to rate sensitivity and energy independence.

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