Corporates Race To Borrow Ahead Of Rate Hike

It’s no guarantee that the Federal Reserve will increase interest rates again, but corporations are betting on it — and soon.

Reports by Financial Times on Thursday (Sept. 1) highlighted the race among businesses to borrow before interest rates spike again when the Fed meets next month. Some analysts attribute the spike in corporate borrowing to this anticipation.

Dealogic data found that borrowing by major corporations, like Microsoft and Coca-Cola, led to the busiest corporate lending August ever, taking out $117 billion in loans.

Those figures have come out just days after Janet Yellen, chief of the Federal Reserve, said in a speech that there is now an even greater argument in favor of raising interest rates. The Fed is slated to meet again on Sept. 21 to discuss an interest rate hike, and reports said that means corporations have less than three weeks to lock in current interest rates on any loans they’re eyeing.

Investment-grade corporate debt in the U.S. could hit $150 billion this month, reports added, and that means corporate treasurers and money managers will have a lot to think about when considering whether to add debt to corporate balance sheets and get ahead of an interest rate increase and possible market volatility.

Persistently low interest rates in the U.S. have impacted other areas of finance, too.

Some analysts believe that low rates could boost FinTech innovation, as new lines of credit to startups could help them grow.