Scio Capital warns higher rates raise refinancing risks for non-investment-grade borrowers
TLT•Scio Capital warned that non-investment-grade debt represents 31% of corporate refinancing requirements across 2026-2028, with about 67% of that debt carrying rates of 6% or less. The firm recommended moving up the capital stack, diversifying income and selling low-conviction positions.
1. Refinancing exposure
Scio Capital warned that non-investment-grade debt accounts for 31% of corporate refinancing requirements across 2026-2028. Roughly 67% of non-investment-grade debt maturing during that period carries interest rates of 6% or less, exposing borrowers to higher refinancing costs.
2. Inflation and rates
U.S. annual CPI reached 3.7%, up from 2.4% in February, while the latest monthly increase was 0.4%. Traders fully priced a quarter-point December rate hike, and the odds of a half-point increase rose to 13.6% from near zero before the report.
3. Firm recommendations
Scio Capital recommended moving up the capital stack, diversifying income beyond traditional corporate credit and selling low-conviction positions.
