Loan-heavy borrowers may spell trouble for investors

US high-yield borrowers that relied wholly on loans are now vulnerable to rising rates

Rising rates trouble

A decade of loose monetary policy has led risky US companies to borrow at rock-bottom rates in the loan market. Now analysts are warning that borrowers with loan-only balance sheets are more vulnerable to downgrades and defaults as higher interest rates bite. And investors are pulling back from certain sectors.

The percentage of loan-only issuers in the Morningstar LSTA US Leveraged Loan Index stood at 58% at year-end 2022, according to Barclays, up from 38% a decade earlier. Loan-only

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