DISTRESS WATCH: Rate Cut Euphoria Trims America’s Troubled Debt

A rally in the riskiest corners of credit markets, spurred by the clearest signal yet that the Federal Reserve will cut rates next month, is whittling away at the pile of troubled debt in the Americas.

Bonds and loans in the region that are in distress — or trading at levels implying it — fell 2.4% in the week ended Aug. 23, the second straight decline. That coincided with a sharp rally in the lowest tier of junk-rated bonds in the US, where risk premiums had their biggest weekly decline in 10 months, according to the Bloomberg Caa US High ...