Interest to invest

Despite US 10-year government bond interest rates roughly doubling from 2019 to 2023, net interest payments by US corporations peaked at USD 95 billion in Q2 2019 and have since decreased to USD 45 billion in Q3 2023. In aggregate, corporations seem to have locked in low interest rates on their borrowings while their excess cash is yielding more now. The trend in net interest payments could reverse quickly though as interest rates are coming down again and thus excess cash is yielding less. At the same time, moving forward corporates have to pay back low fixed rate loans and must refinance at higher rates. Nonetheless, current low net interest payments give corporates breathing space to invest and grow their business.

Source: US Bureau of Economic Analysis, December 2023.