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The visual evidence shows that every peak in the ratio of debt-to-GDP is followed by a peak in defaults.

If this cycle repeats itself, the average default rate for U.S. 好看的suvpublic companies好看的suv could soar past 12 percent, with 好看的suvestimated losses in excess of $1.2 trillion:好看的suv

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Global debt is higher than it's ever been, driven by historically low interest rates.
Source: NYU Salomon Center and Federal Reserve Bank of St. Louis.

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  • The single largest driver of corporate risk is the amount of debt on the balance sheet. The blue line paints a picture of historical debt as a percentage of GDP
  • Since GDP has grown each and every cycle, the actual dollar level of debt today compared to 1991, 2002 and 2008 is much higher
  • The current value of U.S. Non-Financial Corporate Debt is approximately $9 trillion. 好看的suvThis debt is held solely from public companies.好看的suv

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  • This risk is squarely located within U.S. 好看的suvpublic companies好看的suv, which represent a large portion of economic activity
  • In past credit default cycles, the average annual default rate for corporate bonds has maxed out at ~15%

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Nonfinancial Sector Vulnerabilities
Nonfinancial Sector Vulnerabilities shows the enormous exposure as a percentage of GDP across eight developed economies to low-quality/high-risk nonfinancial corporate debt. For example, China’s total speculative-grade debt and debt-at-risk is an estimated 75% of GDP in 2019. From 2009 to 2019, Chinese GDP has grown 108% meaning that high-risk nonfinancial corporate debt grew by 290% to go from making up 40% of GDP in 2009 to 75% of GDP in 2019. Therefore, Chinese high-risk nonfinancial debt has grown at roughly 2.7x the GDP over this period.
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EBIT-to-Interest Ratios
While nonfinancial corporate debt-at-risk has trended lower in some geographies, the percentage of public companies where interest expenses exceed operating profit (or EBIT) is still concerning. As the chart below depicts, the U.S. is among the most at risk, with more than 60% of small-medium U.S. enterprises having interest coverage ratios below 1X.