Credit Rating Agencies Cutting Corporate Ratings at Fastest Pace Since 2009

Over the past two months we have highlighted the fact that onaverage corporate bond credit quality has been deteriorating over the past year.  Bloomberg news reports that the credit agencies, Moody’s and S&P, have reacted by cutting corporate debt ratings at the fastest pace since 2009.  Europe’s second recession in four years and slowing global economic growth have pushed debt-to-EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) ratios for non-financial, investment-grade US companies to 1.5 times, according to a report by analysts at Barclays.  Given the deteriorating fundamentals, we feel it will be difficult for corporate bonds to repeat the strong returns of the past year in 2013.