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September 07, 2026
Partner, Chief Economist
Corporate net interest payments have fallen to 0.4% of GDP because firms locked in record-low fixed rates during the pandemic. The US government did not extend the maturity of its debt outstanding when interest rates were close to zero and now pays 3.6% of GDP in net interest, see chart below.
The cost of higher rates landed on the fiscal side rather than the corporate sector, which is a key reason the tightening cycle since 2022 has failed to slow the economy.
Looking forward, however, the corporate tailwind is temporary as pandemic-era debt rolls over into higher coupons, and the impact will be most negative for highly levered borrowers in credit markets, such as software.
The bottom line is that the transmission mechanism of monetary policy was delayed rather than switched off, and it works through the same channel as always: the more debt you have, the more you are hurt by high interest rates, which is a different way of saying that high-quality companies with low leverage and actual earnings are more attractive both from a debt and equity perspective.
The Daily Spark will resume publication on Wednesday, Sept. 9.
Sources: BEA, Apollo Chief Economist
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