4
Corporations
Corporations balance sheet expansion (debt issuance) lags the movement in underlying interest rates, more closely following changing economic undulations than the level of or changes in interest rates. In this way corporate borrowing can be seen less as responding to the cost of debt, but amplifying any positive effect on the cycle caused by rate cuts.
Japanese rates were already so low, there is little obvious effect on corporate issuance as rates moved negative. Instead corporate loan growth is closely tied to global growth. Similarly in Europe rate cuts don’t seem to be the catalyst for corporate debt issuance. There was some revival following Mario Draghi’s ‘Whatever it takes’ speech and the end of the Euro crisis, but since then the down trend in European corporate debt growth has continued. Loan growth in Switzerland and Sweden has generally been more positive.
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