I agree with both points above, the average punter won't see it coming. From an Australian perspective, we (the media) are far to focused on the residential real estate market and Trump trade reforms to notice broader problems.
Lael Brainard, from the U.S. Federal Reserve, weighed in on the corporate debt issue recently. While she sees the U.S. financial system being much more robust than before the GFC, she acknowledges the risks surrounding the growing deterioration in the quality of corporate debt.
"....we are seeing elevated vulnerabilities in the non-financial business sector. Business borrowing has risen more rapidly than GDP for much of the current expansion and now sits near its historical peak (figure 6). The run-up in corporate debt has brought the ratio of debt to assets close to its highest level in two decades on an overall basis, and this is also true for speculative-grade and unrated firms (figure 7).
And whereas previously, mostly high-earning firms with relatively low leverage were taking on additional debt, analysis of detailed balance sheet information indicates that, over the past year, firms with high leverage, high interest expense ratios, and low earnings and cash holdings have been increasing their debt loads the most. Historically, high leverage has been linked to elevated financial distress and retrenchment by businesses in economic downturns.
Regarding corporate bonds outstanding, recent years have witnessed little change in the relative shares of investment-grade bonds and high-yield bonds. Credit quality has deteriorated within the investment-grade segment, where the share of bonds rated at the lowest investment-grade level has reached near-record levels. As of mid-2018, around 35 percent of corporate bonds outstanding were at the lowest end of the investment-grade segment, which amounts to about $2-1/4 trillion. In comparison, the share of high-yield bonds outstanding that are rated "deep junk" has stayed flat at about one-third from 2015 to 2018, well below the financial crisis peak of 45 percent.
