BNP Sees Liquidity Draining From Weakest Corporate Borrowers

Cash piles for US corporate junk-bond issuers are showing signs of dwindling as liquidity metrics fall from pandemic highs, pressuring the weakest borrowers heading into a downturn.

Companies were able to shore up cash after they stormed the high-yield debt market in record numbers in 2020 and 2021 to tap low borrowing costs. That allowed them to build up their rainy day funds and push out any near-term debt maturities. Now strategists from BNP Paribas sees signs of those cash levels eroding.

The bank says that depleted balance sheet liquidity coupled with an earnings slowdown are creating conditions for “an ...