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Illustration: Aïda Amer/Axios

Despite historically low interest rates, U.S. companies are being unusually frugal, holding back on issuing new debt and pumping up their balance sheets with cash.

Why it matters: Historically, when interest rates are low and the economy is strong, companies have levered up to increase capital expenditures and buy assets in order to expand. The opposite is happening now.

  • In the short term, that means the country is less at risk for economic collapse, but it also shows that American businesses are investing less in the future.

What they're saying: "That is highly unusual, as being late cycle this is precisely when companies are supposed to lever up," credit strategists at Bank of America Global Research said in a recent note.

By the numbers: Net debt declined on a year-over-year basis in the fourth quarter of 2019 for the first time in nearly a decade, Bank of America's data show, meaning companies are issuing less new debt and reducing current obligations at an uncommon rate.

  • 25% of companies reduced their debt levels in 2019 by at least 7.8%.
  • Those numbers are rarely seen during economic booms, BofA strategists note, and are much more akin to "what we see on a more forced basis during and in the aftermath of recessions."

What's happening: Despite increased profits from the Tax Cuts and Jobs Act, CEOs and company leaders have told Axios the uncertainty of the U.S.-China trade war and fears of an imminent recession discouraged big-ticket spending during 2019.

  • Rather than use their tax savings for investment or expansion, they largely socked it away.
  • Data from accounting firm PwC shows company cash holdings rose to $2.4 trillion, the highest amount in decades, a company spokesperson said.

The intrigue: It's not just net debt: Companies have added very little gross debt, dating back to the second quarter of 2017, BofA's data show, the continuation of a "remarkable development."

  • "As we have argued, it is indeed different this time."

Between the lines: Investment grade companies that would be in the best position to issue very cheap debt to finance investment projects or mergers are pulling back in part because they spent so much between 2014-2017 pursuing large-scale M&A.

  • The data show that most companies are improving their fundamentals, but most are BBB-rated, the lowest end of the IG scale.

Go deeper

Biden to sign 15 executive actions on Day One

President-elect Joe Biden. Photo: SAUL LOEB/AFP via Getty Images

President-elect Joe Biden is expected to sign 15 executive actions upon taking office Wednesday, immediately reversing key Trump administration policies.

Why it matters: The 15 actions — aimed at issues like climate change and immigration — mark more drastic immediate steps compared with the two day-one actions from Biden's four predecessors combined, according to incoming White House press secretary Jen Psaki.

Off the Rails

Episode 7: Trump turns on Pence

Photo illustration: Eniola Odetunde/Axios. Photos: Elijah Nouvelage, Alex Wong/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. Axios takes you inside the collapse of a president with a special series.

Episode 7: Trump turns on Pence. Trump believes the vice president can solve all his problems by simply refusing to certify the Electoral College results. It's a simple test of loyalty: Trump or the U.S. Constitution.

"The end is coming, Donald."

The male voice in the TV ad boomed through the White House residence during "Fox & Friends" commercial breaks. Over and over and over. "The end is coming, Donald. ... On Jan. 6, Mike Pence will put the nail in your political coffin."

Big Tech's post-riot reckoning

Photo illustration: Sarah Grillo/Axios. Photo: Tasos Katopodis/Getty Images

The Capitol insurrection means the anti-tech talk in Washington is more likely to lead to action, since it's ever clearer that the attack was planned, at least in part, on social media.

Why it matters: The big platforms may have hoped they'd move to D.C.'s back burner, with the Hill focused on the Biden agenda and the pandemic out of control. But now, there'll be no escaping harsh scrutiny.