The S&P 500 is facing a growing debt refinancing wall as rising bond yields threaten to increase borrowing costs for companies across the index, analysts have warned.
Michael Kantrowitz and Emily Needell of Piper Sandler estimate that about 40% of the debt held by most S&P 500 companies will mature over the next five years. Firms refinancing during that period could face significantly higher interest bills if rates remain elevated.
Higher rates raise pressure on S&P 500 companies
“We continue to see higher rates as THE biggest risk to equity markets in 2026 and 2027,” the analysts said. “The higher rates go and the longer rates remain elevated, the bigger the impact the debt refi wall will have on earnings and growth.”
The warning came as the bond market remained the main focus for investors. Saxo’s strategy team said the average yield across the $32 trillion US Treasury market had risen to 5.05%, while the average yield on government debt globally was approaching 4%, its highest level since 2007.
The increase is pushing up the cost of financing for consumers, businesses and governments, with the resulting squeeze potentially leading to a sharper economic slowdown.
Mortgage rates have also reached the psychologically significant level of 7%, according to UBS economist Paul Donovan. He said the rise was reducing the spending power of new homeowners in a way that was not captured by real income data.
Despite the pressure from higher borrowing costs, equity markets were modestly higher in early trading. S&P 500 futures rose 0.3% after the index slipped 0.02% in the previous session.
In Europe, the Stoxx 600 gained 0.9% and the FTSE 100 was up 0.63% before lunchtime. Japan’s Nikkei 225 rose 1.3%, while India’s Nifty 50 increased 0.25%.
Other markets remained volatile, with Brent crude at 105 dollars a barrel after reaching 108 dollars the previous day. Bitcoin was trading at 84,602 dollars.
Jobless claims offer some reassurance
Recent labour market data provided a more positive signal. Initial US unemployment claims fell by 1,000 to 197,000 in the week ending September 19, below analysts’ expectations.
Continuing claims dropped to 1.717 million, their lowest level since the week ending May 31 2023, according to Thomas Simons of Jefferies.
However, separate data on air travel suggested consumers could be becoming more cautious. US passenger numbers, which have previously weakened ahead of recessions, fell by about 3% year on year in July and have broadly remained at that rate of decline.
