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FirstFT: Credit rating upgrades hit record pace as US economy rebounds

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Credit rating agencies are upgrading hundreds of billions of dollars of US corporate debt, in a partial reversal of the downgrades at the outset of the pandemic that reflects the strong rebound in profitability across much of corporate America.

Roughly $361bn of higher-rated, investment grade bonds have been upgraded in the past two months, including a record $184bn in June, according to data from Bank of America.

The brisk turnround shows credit rating agencies such as S&P Global, Moody’s and Fitch believe the economic recovery spurred by vaccine rollouts has made corporate debt piles more manageable. It also reflects the abundant liquidity and low borrowing costs available to many companies, in part thanks to monetary stimulus from the Federal Reserve.

Column chart of Value of US corporate debt upgraded or downgraded each month ($bn) showing Rating agencies have a rosier outlook for Corporate America

Rating agencies were chastised after the 2008 financial crisis for giving pristine grades to bonds that ultimately defaulted. But during the pandemic they moved swiftly to downgrade their assessments on swaths of debt.

Five more stories in the news

1. Morgan Stanley trading dip offset by deals and wealth unit The Wall Street bank became the latest US lender to report that higher fees from investment banking had helped to pick up some of the slack from a slowdown in trading as it posted an increase in revenues and profits for the second quarter.

2. More than 1,000 feared missing in German floods The death toll from heavy flooding in western Germany has risen to 81 and more than 1,000 residents are believed to be missing. Torrential rains led rivers to overflow and wash through many districts of Germany’s North Rhine-Westphalia and Rhineland-Palatinate regions, in one of the country’s most destructive natural disasters in years.

3. ‘I’m not into coups’ Donald Trump has lashed out at General Mark Milley, chair of the joint chiefs of staff, after several new books recounted how the top-ranking US military official feared a “Reichstag moment” in the White House and compared Trump to Adolf Hitler as the former president refused to acknowledge the results of November’s presidential election.

4. China snubs senior US official Beijing has refused to grant Wendy Sherman, deputy secretary of state, a meeting with her counterpart during a proposed visit to China. It would have been the first high-level engagement between the two countries since their first meeting in Alaska, which erupted into a public spat between Antony Blinken, US secretary of state, and Yang Jiechi, the top Chinese foreign policy official.

5. Olympics chief warns against ‘divisive’ athlete protests Thomas Bach, president of the International Olympic Committee, has warned athletes against political protests at the upcoming Tokyo games. “The podium and the medal ceremonies are not made . . . for a political or other demonstration,” he said in an interview with the Financial Times ahead of next Friday’s opening ceremony.

Coronavirus digest

  • US president Joe Biden said he would be ready “within the next several days” to say when the US might lift its Covid-related travel ban on European countries after a meeting with German chancellor Angela Merkel.

  • Canada could permit fully vaccinated Americans to enter the country by mid-August and international visitors by September, according to Prime Minister Justin Trudeau.

  • Los Angeles is reinstating a mask mandate, requiring residents to wear face coverings in indoor situations regardless of vaccination status. The requirement goes into effect at 11:59pm local time on Saturday.

  • Scientists are racing to find out what causes long Covid-19. Doctors fear ‘tens of thousands’ of people in the UK could be afflicted by multiple symptoms.

Sign up for our Coronavirus Business Update newsletter for more Covid-19 news and follow the latest developments on our live blog.

The day ahead

Earnings State Street, an innovator in the market for exchange traded funds, and rival Charles Schwab publish earnings today.

Retail sales data The US Commerce Department is expected to release data showing retail sales dipped 0.4 per cent in June.

Biden to warn about doing business in China The state department is expected to warn US companies of the rising risks of operating in Hong Kong as China asserts more control over the financial hub.

What else we’re reading

A wild ride into the cryptosphere Frank Partnoy bought a virtual horse, raced him to riches (sort of) — and got a first-hand look at the delights and dangers of “non-fungible tokens”. His lesson? If you like trading collectibles, you’ll almost certainly enjoy trading NFTs. But be careful. Racing horses can be addictive, in any form.

  • Opinion: Crypto asset companies face a stark choice: learn to live with regulators or endure their wrath, writes Adam Samson.

Apple and Klarna are cutting up credit cards When Apple and Goldman Sachs explore a line of business, there is probably money in it. So the news that Apple, backed by Goldman, plans to add a “buy now, pay later” feature to Apple Pay shows that financial opportunity knocks, writes John Gapper. Buy now, pay later can be a clever innovation, if shoppers use it wisely.

Russia’s rail ambitions State-run Russian Railways is investing $17bn over a decade as part of an ambitious plan that aims to carry not just passengers but also grab a larger slice of the billions of dollars worth of goods that are transported annually from Asia to Europe. But the country faces stiff competition: not least of all from China’s Belt and Road Initiative.

What do we mean when we talk about workplace culture? Workplace culture is a vague term that is most easily described as being an organisation’s “DNA”. People are hired because of it. It means they get the same jokes and share the same cultural references as the leaders. But this is a “mirror-tocracy”, argues Annie Auerbach, and creates an echo chamber that is bad for the company’s bottom line.


The Cult of We The Wall Street Journal’s Eliot Brown and Maureen Farrell retell the story of excess at office-leasing group WeWork and its charismatic co-founder Adam Neumann.

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