I have taken a short position on jaaa, bxmt and mitt.
From 2026-2029 there is going to be around $5.9T of us corporate debt maturing in that time period, which is around 50% of current outstanding corporate debt; and from 2026-2029 around $3T - $4T or CRE debt will be maturing making up 60-80% of current outstanding CRE debt. Most of this debt was issued during the low rate period, post covid meaning for the debt refinancing it will be at a much higher interest rate. While the banks have started taking on less risk non banks have taken their place especially for risky consumer and CRE loans giving out much riskier loans during the low rate environment with higher LTV ratios and lower DSCR as those loans were then often sold on the secondary market and they get more money for issuing higher risk loans. Investment banks have been issuing lots of leveraged loans and hy bonds over the last few years to keep up with the demand they have also been issuing riskier lls and hy bonds with cov lite lls now making up over 90% of ll issuance, as again these loans are sold on the secondary market so they take no credit risk and they get a higher payment for riskier loans.
I also think this will be made worse with high inflation here is why I think inflation will rise: base rates are low, the FED has started to expand its balance sheet, high oil/gas prices, high government spending and the dollar loosing its demand in global trade. If inflation rises, interest rates will likely follow, meaning the corporations and CRE loans refinancing will have to do it at even higher rates and inflation will drag their finances even further.