Name:   MartiniMan - Subject:   Corporations are killing it on interest rate rises Date:   7/26/2023 8:14:20 AM (updated 7/26/2023 8:57:06 AM)

Unlike the Federal government, whose debt service is now approaching $1T a year because of higher interest rates, corporations are making a killing. Most govt debt like T-bills are only set for a few days to 30 years for bonds.  But much of their debt is in T-bills, which I know from personal experience are paying around 5%.

Corporations are huge net borrowers, either from banks or from corporate bonds.  So it seems logical that as interest rates have risen under Bidenomics (defined as high interest rates, inflation, high energy costs, etc.) these corporatioins should be getting squeezed by higher debt service costs and yet the opposite has happened.  These corporations locked in long term debt with low interest rates in 2020 and 2021 so their cost of borrowing is not yet rising.  And yet their return on their cash is running around 5% which has added a crap load of profit to the bottom line. 

Kudos to CFO's everywhere that were wise enough to lock in low rates giving them loads of cash now making 5% just sitting there.  However, once their current portfolio matures they will be forced to incur higher rates but for now they are living large and the really smart ones locked in these rates for a long time.