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Illustration: Eniola Odetunde/Axios

Barely five months into the year, U.S. investment-grade companies already have issued more than $1 trillion in debt — nearly as much as in all of 2019, which was well above average.

Why it matters: And buying shows no sign of letting up, thanks in large part to ultra-low interest rates and the Fed's promise of "no limit" purchases of Treasury, investment-grade corporate and even junk bonds.

What's happening: "Nearly $200 billion in debt has been issued in May so far as companies capitalize on growing risk-on attitudes," Bank of America research analysts said in a recent note to clients.

  • After $273 billion of outflows from bond funds in March, money has raced back into fixed income with positive inflows every week since mid-April, data from the Investment Company Institute show.

What to watch: Despite warnings of widespread downgrades, defaults and bankruptcies from various ratings agencies, credit analysts and the Fed itself, bond spreads are narrowing, indicating bullishness from investors as more of the U.S. economy opens for business.

  • "There's been a flood of issuance ... and the question is how much more can these spreads narrow," Subadra Rajappa, head of U.S. rates strategy at Société Générale, tells Axios. "My concern is that it seems like all this narrowing is a bit overdone."

Driving the news: Minutes from the Fed's latest policy meeting released Wednesday showed the central bank contemplating a program to cap the yields on short- and medium-term Treasuries known as yield-curve control — a policy employed by the Bank of Japan and Reserve Bank of Australia.

  • That would ensure borrowing costs stay low and likely encourage even more debt issuance from companies.

What could go wrong: Already warning that the economic damage from the pandemic will be deep and long-lasting, the Fed's latest financial stability report highlights the risk added by the growing corporate debt binge to exacerbate the coronavirus-driven recession.

Of note: Highly indebted "zombie" companies — firms that don't earn enough revenue to pay the interest on their debt — are one out of every six U.S. companies and currently control nearly 2.2 million jobs.

Flashback: "High levels of corporate debt likely won’t cause an economic downturn, but they may accelerate one as highly leveraged companies fail, forcing layoffs, decreasing aggregate demand and creating a downward spiral of bankruptcies and further layoffs," the U.S. Joint Economic Committee wrote in October 2019.

  • The committee cited Fed chair Jerome Powell himself, noting, “[a]highly leveraged business sector could amplify any economic downturn as companies are forced to lay off workers and cut back on investments.”

Go deeper: No, insurance doesn't cover that

Go deeper

Felix Salmon, author of Capital
Aug 27, 2020 - Economy & Business

America has a new central bank

Illustration: Eniola Odetunde/Axios

Today is a truly historic day in Fed history — one that will have a transformative effect on U.S. monetary policy for the foreseeable future.

Driving the news: For decades, the main job of central banks has been to keep inflation down. The Fed has now effectively changed that policy, to instead prioritize maximum employment.

Updated 50 mins ago - World

UK government: Kremlin has plan "to install pro-Russian leadership" in Ukraine

British Foreign Secretary Elizabeth Truss. Photo: Gints Ivuskans / AFP via Getty Images

The United Kingdom's Foreign Secretary on Saturday night said the government has "information that indicates the Russian Government is looking to install a pro-Russian leader in Kyiv as it considers whether to invade and occupy Ukraine."

Driving the news: U.S. National Security Council spokeswoman Emily Horne called the intelligence "deeply concerning" in a statement to Axios. The Biden administration has said Russia is actively manufacturing a pretext for invasion and warned that Putin could use joint military exercises in Belarus as cover to invade from the north.

Updated 2 hours ago - Science

This powerful new accelerator looks for keys to the center of atoms

Illustration: Eniola Odetunde/Axios

Nuclear physicists trying to piece together how atoms are built are about to get a powerful new tool.

Why it matters: When the Facility for Rare Isotope Beams begins experiments later this spring, physicists from around the world will use the particle accelerator to better understand the inner workings of atoms that make up all the matter that can be seen in the universe.