Both the corporate bond and equity markets responded positively to the latest drop by Treasury bond yields and the likelihood of at least two reductions of the federal funds rate during the remainder of 2019.
According to the Federal Reserve's “Financial Accounts of the United States”, first-quarter 2019's outstanding debt of U.S. nonfinancial corporations advanced by 8.1% year-over-year to a new record high of $9.926 trillion.
The implied probability of a fed funds rate cut at the Federal Open Market Committee's July 31 meeting recently soared to 72% mostly in response to Jerome Powell's apparent willingness to heed the recessionary warning of a possibly persistently inverted yield curve.
Since May 3, or just prior to the latest episode of trade-related stress, the market value of U.S. common stock had plunged by 5.7% as of May 29's close for a paper loss of $1.735 trillion.
President Trump has escalated the trade war with China, and nearly everyone has been wrong-footed by the move.
Fed Chairman Jerome Powell recently addressed the issue of business borrowing. In a May 20 speech, Mr. Powell suggested that, by itself, the new record high ratio of nonfinancial-corporate business debt to GDP is much less of a risk to systemic financial liquidity than was home mortgage debt's record high 100% of disposable personal income from 2007.