$4.3 trillion of U.S. corporate bonds come due by 2031, and the Treasury base rate alone is 4 points higher

About $4.3 trillion of bonds issued in U.S. markets by non-financial companies will mature between 2027 and 2031, Reuters reported on Friday, citing LSEG data. The annual total climbs from about $572 billion in 2027 to roughly $1.03 trillion in 2030, because many companies pushed their debt out to later years when they refinanced during the pandemic.

The steepest part of that climb is in the riskiest debt. According to the same LSEG figures, high-yield maturities rise from $68.5 billion in 2027 to $314.1 billion in 2029, more than four times as much. Investment-grade maturities grow far less, from $437 billion to $512.6 billion. By 2029, junk bonds make up about a third of everything coming due, against 12% in 2027.

The number behind the wall: the base rate

Most of the bonds due in 2027 and 2028 were sold when borrowing was nearly free. Treasury's own daily yield curve shows how far the benchmark has moved since then. A company refinancing today pays a spread on top of these rates, so the change in the Treasury yield is roughly the minimum increase in its coupon if its credit is unchanged.

A seven-year bond sold in September 2021 matures in September 2028. On our arithmetic, a company rolling $500 million of that debt into a new seven-year bond would pay about $19.5 million a year more in interest from the base-rate change alone, before any widening in its own spread. For a borrower whose earnings have not grown since 2021, that comes straight out of cash flow.

PIMCO told Reuters that most investment-grade and high-yield issuers should be able to absorb higher costs, but that coupons on CCC-rated bonds due in 2027 and 2028 "could roughly double" if refinanced at current index yields. CCC is the lowest rung of the junk market, and those are the companies with the least room to pay more.

Why the long end matters more than the Fed right now

The refinancing problem is set by five- to ten-year yields, and those are the ones that have been rising. On Friday the 2-year Treasury yield fell to 4.81% from 4.87%, while the 10-year held at 5.17% and the 30-year rose to 5.49%, according to Treasury data. A Fed rate cut would lower short-term borrowing costs, but it would not by itself bring down the yields that set a new seven-year bond coupon. We looked at that divergence in our story on the 30-year yield topping 5.5%.

The borrowers the Fed is starting to ask about

The biggest new supply is not coming from weak companies. Goldman Sachs expects Amazon, Alphabet, Meta, Microsoft and Oracle to issue about $420 billion of gross debt in 2027, around 60% more than its 2026 estimate, Reuters reported. That supply competes with refinancing borrowers for the same investors.

On the same day, Kansas City Fed President Jeff Schmid raised the question of whether the web of companies and contracts behind the AI buildout could become systemic. "Are we moving to a too-big-to-fail AI ecosystem," he asked, according to Reuters, adding that regulators need to understand "what's inside." Oracle alone disclosed $288 billion of data center lease commitments not yet on its balance sheet, as we reported this week.

What to watch

• High-yield issuance in the fourth quarter. Borrowers facing 2027 and 2028 maturities often refinance a year or more early; a slow window would push more of the wall into fewer months.
• Next week's jobs report and PCE inflation data, previewed in our week-ahead story, which will shape whether the 10-year stays above 5%.
• Credit spreads on CCC debt, the first place PIMCO expects the squeeze to show.

Sources: Reuters, citing LSEG, PIMCO and Goldman Sachs; Reuters on remarks by Kansas City Fed President Jeff Schmid; U.S. Treasury daily par yield curve rates. The refinancing example is a Chronicle calculation. This is market information, not investment advice.