Board of Governors of the Federal Reserve System

Figure 1. Trends in Corporate Debt to GDP

The left-hand side panel of Figure 1 shows a line graph that plots the annual ratio of corporate bonds outstanding to nominal GDP over time. The right-hand side panel of Figure 1 shows a line graph that plots the annual ratio of corporate loans outstanding to nominal GDP over time. In both panels, the x-axis displays calendar years from 2004 to 2018 in yearly increments.

In the left-hand side panel, the solid blue line displays the ratio of investment-grade corporate bonds to nominal GDP. The solid red line displays the ratio of high-yield corporate bonds to nominal GDP. There is an upward trend in the solid blue line for IG corporate bonds over time, while the solid red line for HY corporate bonds remains flat over time. The solid blue line lies above the solid red line over the entire period from 2004 to 2018.

In the right-hand side panel, the solid blue line displays the ratio of commercial and industrial loans to nominal GDP. The solid red line displays the ratio of institutional leveraged loans to nominal GDP. There is an upward trend in the solid red line for leveraged loans over time, while the solid blue line remains flat over time. In 2004, the solid blue line lies above the solid red line and by 2010, the two lines are relatively at the same level.

Return to text

Figure 2. Bonds-to-Assets and Loans-to-Assets Ratios Over Time

The left-hand side of Panel A of Figure 2 shows a line graph that plots the annual ratio of corporate bonds to total assets over time across credit rating categories. The right-hand side of Panel A of Figure 2 shows a line graph that plots the annual ratio of corporate loans to total assets over time across credit rating categories. The left-hand side of Panel B of Figure 2 shows a line graph that plots the annual ratio of corporate bonds to total assets over time across size terciles. The right-hand side of Panel B of Figure 2 shows a line graph that plots the annual ratio of corporate loans to total assets over time across size terciles. In all figures, the x-axis displays calendar years from 2004 to 2018 in yearly increments.

In the left-hand side figure of Panel A, the solid blue line displays the ratio of corporate bonds to total assets for investment-grade firms, the solid yellow line displays the ratio of corporate bonds to total assets for high-yield firms, and the solid red line displays the ratio of corporate bonds to total assets for unrated firms. There is an upwards trend in the solid blue line for IG firms over time, while the solid yellow line for HY firms remains flat over time and the solid red line for unrated firms decreases slightly over time. Over the entire period, the solid blue and yellow lines, both at relatively the same levels, lie far above the solid red line.

In the right-hand side figure of Panel A, the solid blue line displays the ratio of corporate loans to total assets for investment-grade firms, the solid yellow line displays the ratio of corporate loans to total assets for high-yield firms, and the solid red line displays the ratio of corporate loans to total assets for unrated firms. There is an upwards trend in the solid yellow line for HY firms over time, while the solid blue and red lines for IG and unrated firms, respectively, remain flat over time. Over the entire period, the solid yellow lie lies above the solid red line, which lies above the solid blue line.

In the left-hand side figure of Panel B, the solid green line displays the ratio of corporate bonds to total assets for the largest tercile of firms, the solid blue line displays the ratio of corporate bonds to total assets for the middle tercile of firms, and the solid purple line displays the ratio of corporate bonds to total assets for the smallest tercile of firms. There is an upwards trend in the solid green line for the largest firms over time, while the solid blue line for mid-sized firms remains flat over time and the solid purple line for the smallest firms decreases slightly over time. Over the entire period, the solid green line lies far above the solid blue line, which lies slightly above the solid purple line over the entire period.

In the right-hand side figure of Panel B, the solid green line displays the ratio of corporate loans to total assets for the largest tercile of firms, the solid blue line displays the ratio of corporate loans to total assets for the middle tercile of firms, and the solid purple line displays the ratio of corporate loans to total assets for the smallest tercile of firms. There is a gradual upward trend in both the solid green and blue lines for the largest and mid-sized firms, respectively, while the solid purple line for the smallest firms remain relatively flat over time. All three lines lie relatively close to each other over the entire period.

Calculations based on: S&P Compustat, S&P CapitalIQ

Return to text

Figure 3. Capital Structure Comparisons across Credit Rating and Firm Size Groups Over Time

Panel A of Figure 3 shows a stacked bar graph of the distribution of firm credit ratings for 2004 and 2018. The left bar shows the firm distribution of credit ratings for investment-grade firms (solid blue), high-yield firms (solid yellow), and unrated firms (solid red) in 2004. The right bar shows the same for 2018. Compared with 2004, the solid blue and solid yellow portions of the bars for IG firms and HY firms, respectively, increased in 2018, while the solid red portion of the bar for unrated firms decreased. In both 2004 and 2018, the unrated firms represents a larger proportion of firms, followed by high-yield firms, and investment-grade firms.

Panel B of Figure 3 shows a stacked bar graph of the asset-weighted average loan-to-asset ratio and bond-to-asset ratio within credit rating groups for 2004 and 2018. The two left-most bars show the bonds and loans to asset ratios for investment-grade firms in 2004 and 2018, with the solid blue portions of the bars displaying the bonds-to-asset ratios and the solid light blue portions displaying the loans-to-asset ratios. Compared with 2004, the bonds-to-asset ratio increased by about 10 percentage points in 2018, while the loans-to-asset ratio increased only very slightly. In both years, the bonds-to-asset ratio portions of the bars are far larger than the loans-to-assets portions of the bars. The two middle bars show the bonds and loans to asset ratios for high-yield firms in 2004 and 2018, with the solid yellow portions of the bars displaying the bonds-to asset ratios and the solid light yellow portions displaying the loans-to-asset ratios. Compared with 2004, the loans-to-assets ratio increased by about 10 percentage points in 2018, while the bonds-to-assets ratio increased only slightly. In both years, the bonds-to-assets ratio portions of the bars are larger than the loans-to-assets portions of the bars. The two right-most bars show the bonds and loans to asset ratios for unrated firms in 2004 and 2018, with the solid red portions of the bars displaying the bonds-to asset ratios and the solid light red portions displaying the loans-to-asset ratios. Compared with 2004, the loans-to-assets ratio increased by just under 10 percentage points in 2018, while the bonds-to-assets ratio decreased by about 5 percentage points. In 2004, the bonds-to-assets ratio portion of the bar is far larger than the loans-to-assets ratio portion of the bar. By 2018, both the bonds- and loans-to-asset portions of the bars are roughly equal.

Panel C of Figure 3 shows a stacked bar graph of the distribution of outstanding bonds and loans by credit rating categories in 2004 and 2018. The two left-most bars show the distribution for bonds outstanding, with the solid blue portions of the bar reflecting the proportions comprised by investment-grade firms, the solid yellow reflecting high-yield firms, and the solid red reflecting unrated firms. Compared with 2004, investment-grade firms comprises a larger proportion of bonds outstanding in 2018, while the proportion of high-yield firms remains roughly the same and that of unrated firms decreased. In both 2004 and 2018, investment-grade firms comprises the largest proportions of bonds outstanding, followed by high-yield firms, and finally unrated firms. The two right-most bars show the distribution of loans outstanding, with the solid blue portions of the bar reflecting the proportions comprised by investment-grade firms, the solid yellow reflecting high-yield firms, and the solid red reflecting unrated firms. Compared with 2004, investment-grade firms comprises a very slightly smaller proportion of loans outstanding in 2018, while the proportion of high-yield firms increased and that of unrated firms decreased. In both 2004 and 2018, high-yield firms comprises the largest proportions of loans outstanding, followed by roughly equal proportions of investment-grade and unrated firms.

Panel D of Figure 3 shows a stacked bar graph of the distribution of firm size terciles for 2004 and 2018. The left bar shows the firm distribution of credit ratings for the largest tercile (solid green), middle tercile (solid blue), and smallest tercile (solid brown) in 2004. The right bar shows the same for 2018. By construction due to annual rebalancing of size terciles, the two bars are the roughly the same, with the largest tercile comprising the largest portion, followed by the middle tercile, and finally by the smallest tercile.

Panel E of Figure 3 shows a stacked bar graph of the asset-weighted average loan-to-asset ratio and bond-to-asset ratio within size terciles for 2004 and 2018. The two left-most bars show the bonds and loans to asset ratios for firms in the largest terciles in 2004 and 2018, with the solid green portions of the bars displaying the bonds-to-asset ratios and the solid light green portions displaying the loans-to-asset ratios. Compared with 2004, the bonds-to-asset ratio increased by over 5 percentage points in 2018, while the loans-to-asset ratio increased by a smaller amount. In both years, the bonds-to-asset ratio portions of the bars are far larger than the loans-to-assets portions of the bars. The two middle bars show the bonds and loans to asset ratios for firms in the middle tercile in 2004 and 2018, with the solid blue portions of the bars displaying the bonds-to asset ratios and the solid light blue portions displaying the loans-to-asset ratios. Compared with 2004, the loans-to-assets ratio increased by about 5 percentage points in 2018, while the bonds-to-assets ratio remained roughly equal. In 2004, the bonds-to-asset ratio portion of the bar is l;’arger than the loans-to-asset ratio portion of the bar. By 2018, the loans-to-asset portion of the bar is slightly larger than the bonds-to-asset portion of the bar. The two right-most bars show the bonds and loans to asset ratios for firms in the smallest tercile in 2004 and 2018, with the solid brown portions of the bars displaying the bonds-to asset ratios and the solid light brown portions displaying the loans-to-asset ratios. Compared with 2004, the loans-to-assets ratio increased in 2018, while the bonds-to-assets ratio decreased. In both 2004 and 2018, the loans-to-assets ratio portions of the bars are larger than the bonds-to-assets ratio portions of the bars.

Panel F of Figure 3 shows a stacked bar graph of the distribution of outstanding bonds and loans by size terciles in 2004 and 2018. The two left-most bars show the distribution for bonds outstanding, with the solid green portions of the bar reflecting the proportions comprised by firms in the largest tercile, the solid blue reflecting firms in the middle tercile, and the solid brown reflecting firms in the smallest tercile. For corporate bonds, the largest firms overwhelmingly dominate firms of other sizes, with the solid green portions of the bars comprising almost the entire heights of the bars in both 2004 and 2018. The two right-most bars show the distribution of loans outstanding, with the solid green portions of the bar reflecting the proportions comprised by firms in the largest tercile, the solid blue reflecting firms in the middle tercile, and the solid brown reflecting firms in the smallest tercile. Compared with 2004, firms in the largest tercile comprises a very slightly smaller proportion of loans outstanding in 2018, while the proportion of firms in the middle tercile increased and that of firms in the smallest tercile decreased. For corporate loans, the largest firms overwhelming dominate firms of other size with the solid green portions of the bars comprising the vast majority of the heights of both the 2004 and 2018 bars.

Return to text