Home Investing A $3-trillion credit market has corporate bond investors on edge

A $3-trillion credit market has corporate bond investors on edge

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Teva Pharmaceutical’s bonds were cut to junk from investment grade by Moody's after its US$41-billion buyout of Allergan's generics business in 2016 left the company with a debt load that outweighed its value in the stock market.Akos Stiller/Bloomberg

A huge swath of the corporate bond market is looking increasingly vulnerable.

Bonds with the lowest investment grade have been a market darling over the past decade, ballooning in size as low global interest rates drew fund managers seeking higher returns. But as borrowing costs climb to a four-year high just as investors begin to anticipate a downturn in the global economy, some analysts are starting to sound the alarm.

“We’re late in the credit cycle, and trying to figure out when everything turns,” said Erin Lyons, a senior credit strategist at New York-based research firm CreditSights Inc. “Some of these may eventually be downgraded.”

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