Year: 2023

US Retail Sales Edge Higher as Key Metric Shows Resilient Demand

The value of retail purchases rose 0.2% in June after an upwardly revised 0.5% increase in May, Commerce Department data showed Tuesday. The figures aren’t adjusted for inflation.

So-called control group sales — which are used to calculate gross domestic product and exclude food services, auto dealers, building materials stores and gasoline stations — accelerated to a 0.6% advance, twice the prior month’s gain. (…)

Receipts at restaurants and bars — the only service-sector category in the report — edged up a modest 0.1% after surging 1.2% in the prior month. (…)

My estimate of retail inflation (0.33 CPI-Durables + 0.67 CPI-Nondurables) is -0.1% in June after +0.6% in April and -0.3% in May making real sales up 0.3% in June following -0.2% in April and +0.9% in May. Erratic but still growing overall.

Notice the negative trend in goods inflation since July of 2022, down 8 of the last 12 months and 3 of the last 4.

Control sales ex-restaurants and bars are up 0.55% MoM after +0.3% and +0.55% the previous 2 months. Pretty steady.

• Turn Out the Lights, the Consumer Party’s Over?

John Authers:

So, how close is the party to being over? This resilient strength may wane sooner than many think. Crucial is how much money consumers still have left over from the pandemic. So far, bears have been surprised by how long their savings have lasted. But data from Citi Research as of July 6 show that excess savings accumulated over the pandemic are nearing depletion in the US. The contrast is stark when juxtaposed with Europe, the UK, Australia and Japan. In those economies, savings haven’t been drawn down to anything like the same extent. (…)

The following graph by TD Securities underscores the same finding. The US has seen its surplus in household savings tumble by a magnitude far greater than other major economies. This is why James Rossiter, the firm’s head of global macro strategy, sees the US entering a recession early next year.

“Excess savings have absorbed much of the nominal shock from higher inflation, allowing consumers (especially in the US) to continue consuming as usual,” he wrote in a Tuesday note. “One could therefore argue that high excess savings in other major economies might buffer consumers from higher rates going forward, but once those excess savings are eroded, interest rate pass-through will accelerate.” (…)

For another sign that conditions aren’t quite so good for consumers anymore, credit scores are falling after a pandemic-era improvement, while the banks that reported results in the last few days have all been citing higher charge-offs on credit card debt, as reported by Jennifer Surane.

It’s difficult to envisage a recession starting until those extra savings have been used up. Once they have, the chances are that high interest rates will still be in force, which will drive a slowdown in economic activity. But the resilience of American spending habits has already caught out many economists. It’s no surprise that the projected start date for the next recession keeps being pushed back.

Savings are helpful but consumer expenditures are intimately linked to labor income. Aggregate weekly payrolls (employment x hours x wages) (black) were still up 6.3% YoY in June, +3.2% in real terms, right in line with total consumer expenditures as services continue to offset slowing spending on goods. Retail sales were up 1.5% YoY in June, still a respectable 1.6% gain considering that retail inflation was -0.1%.

On a MoM basis, labor income keeps rising at a 5-6% annualized rate supported by steady wage gains (black):

One of the biggest risk for consumers, the economy and equity markets is energy inflation, -16.5% in June, boosting disposable income and corporate profit margins.

Oil Rises to $80 as Russian Supply Drop Offsets Economy Risks

Brent futures added 0.6% in thin trading volumes on Wednesday. It rose the previous session as data showed that Russia’s crude shipments fell to a six-month low in the four weeks to July 16. The curbs suggest that Moscow is fulfilling a pledge with its partners in the OPEC+ coalition to rein in supplies. (…)

Russia said it aims to reduce its third-quarter crude export plans by 2.1 million tons, in line with its previously stated pledge to cut overseas shipments by 500,000 barrels a day in August. (…)

US companies cut day-to-day costs to keep expenses in check

The total operating expenses of companies rated investment grade by S&P Global Ratings fell 5.3% in the first quarter to $2.858 trillion, indicating companies reduced day-to-day running costs such as wages and business travel.

Companies with weaker balance sheets also trimmed costs. Total operating expenses of non-investment-grade companies fell 3.8% from the fourth quarter of 2022 to $628.71 billion, according to the latest data from S&P Global Market Intelligence.

The energy and consumer discretionary sectors were particularly active in cutting costs with declines of over 13% and 10%, respectively, among the investment-grade tranches. Non-investment-grade companies in both sectors made similar cuts, at 13.4% and 8.6% reductions in operating costs from the previous quarter, respectively.

The decline in expenses lowered the median ratio of operating expenses to total revenue for investment-grade-rated companies to 83.8% from 85.0% at the end of 2022.

By contrast, the cuts by lower-rated companies were not enough to lower the median ratio, which rose to 91.4% from 90.6% as revenues were hit harder. The most notable rises in the ratio were in real estate, communication services and information technology. (…)

The S&P Global post also shows some ratios by sector.

Canadian Inflation Slows to 2.8%, Though Core Remains Sticky

The consumer price index rose 2.8% in June from a year ago, Statistics Canada reported Tuesday in Ottawa. That’s slower than the median estimate of 3% in a Bloomberg survey of economists. On a monthly basis, the index rose 0.1%, also weaker than expectations of 0.3%.

Two key yearly inflation measures tracked closely by the Bank of Canada — the so-called trim and median core rates — also dropped, averaging 3.8%. That’s down from an upwardly revised 3.9% a month earlier but faster than 3.65% expected by economists.

While those figures showed deceleration, a three-month moving average of the core measures — which Governor Tiff Macklem has flagged as key to his team’s thinking — rose to an annualized pace of 3.81%, from 3.71% previously, according to Bloomberg calculations. (…)

A $500 Billion Corporate-Debt Storm Builds Over Global Economy

(…) “It’s like an elastic band,” says Carla Matthews, who heads contentious insolvency and asset recovery at consulting firm PwC in the UK. “You can get away with a certain amount of tension. But there will be a point where it snaps.”

That’s starting to happen already, with more than 120 big bankruptcies in the US alone already this year. Even so, less than 15% of the nearly $600 billion of debt trading at distressed levels globally have actually defaulted, the data show. That means companies that owe more than half-a-trillion dollars may be unable to repay it — or at least struggle to do so.

This week, Moody’s Investors Service said the default rate for speculative-grade companies worldwide is expected to hit 5.1% next year, up from 3.8% in the 12 months ended in June. Under the most pessimistic scenario, it could jump as high as 13.7% — exceeding the level reached during the 2008-2009 credit crash.

Of course, much remains uncertain. The US economy, for one, has remained surprisingly resilient in the face of higher borrowing costs, and the steady slowdown in inflation is raising speculation the Fed may be steering the economy to a soft landing. Yield spreads in the US junk-bond market — a key measure of the perceived risk — have also narrowed since March, when the collapse of Silicon Valley Bank briefly sowed fears of a credit crisis that never materialized. (…)

The more defaults rise, the more investors and banks may pull back on lending, in turn pushing more companies into distress as financing options disappear. The resulting bankruptcies would also pressure the labor market as employees are let go, with a corresponding drag on consumer spending. (…)

More than a quarter of the distressed debt worldwide  — or about $168 billion — are tied to the real estate sector, more than any other single group, the data show.

There seems to be little relief on the horizon. A survey by property broker Knight Frank found that half of the international firms it surveyed are planning to cut down on office space. Coaxing tenants back can be expensive, particularly as businesses look for more environmentally friendly workspaces. (…)

More than $70 billion of debt from private equity owned companies is trading at distressed levels. (…)

• The $785 Billion Junk-Bond Maturity Wall Has Never Been So Close World’s riskiest borrowers in a race against time to refinance

(…) On average, these companies now have 4.7 years to put fresh financing in place, the least amount of time ever, according to a Bloomberg global index. (…)

More than 40% of the maturity wall, or debt that needs to be refinanced between 2024 and 2026, was taken out then [the pandemic]. (…)

Refinancing costs, the extra interest companies have to pay when replacing debt, stand at about 3%, more than five times the average since 2018. (…)

KKR, a savvy lender, is more nuanced on the credit cycle:

(…) this is still not the time to simply buy the market when it comes to riskier loans, and there is the possibility of a ‘double whammy’ from higher defaults and lower reference rates if the U.S. encounters a more severe downturn this cycle.

(…) although we remain cautious about the outlook for margins, HY credit fundamentals are much better than they have been in past cycles. Just consider that the average issuer now has a rating of BB or higher, versus B or lower in 2006-2007, and that about a quarter of the BB market is now senior secured, up from zero percent pre-GFC.

(…) we continue to think that RE lending overall will hold up much better than it did in the GFC thanks to lower LTVs, less pro-forma underwriting, and the fact that asset values have already reset in many sectors, providing more of an equity ‘cushion’ before bondholders take losses. As such, we think that CRE lending may be one of the most compelling ways to add Real Estate exposure in scale at this point in the cycle.

(…) our analysis actually suggests that CRE defaults will not be as negative this cycle as they were during the GFC. For instance, our base case shows aggregate CRE bank loan losses this cycle at 3.4%, versus 5.7% in our bear case and fully 10.5% during the GFC. On the CMBS side, our base and bear cases for cumulative losses are slightly higher at 4.8% and 7.5%, respectively, though still well below the 10.1% recorded after 2008.

Why do we expect a more benign CRE credit cycle this time around? For one thing, we are of the view that a lot of the pain for investors this cycle will be heavily concentrated in Office debt, which is actually only about 30% of the total CRE debt market. In fact, for most sectors and most vintages in the remaining 70% of CRE loans, asset values are not significantly lower than they were at underwrite (though loans underwritten during the go-go years of 2021-2022 may run into some trouble).

By contrast, Office values actually peaked back in 2019, which means more outstanding loans will have trouble refinancing. Overall, the potential for losses to be concentrated in a single sector would be a lot easier for markets to navigate versus the GFC when CRE asset values declined sharply across almost all sectors.

Second, underwriting standards for CRE debt have become much more rigorous since the financial crisis, with a lot less pro-forma underwriting and an average underwrite LTV of around 55-60%, versus 65-70% in the pre-GFC years. As such, there is a lot more protection for lenders baked into CRE capital structures. Risk-retention requirements and better credit enhancement have helped mitigate risk for high-grade CMBS, too. So, our bottom line is that we do not think that the risks for holders of CRE debt overall will be as severe as they were during the last major default cycle.

However, we are not sounding the all-clear, and we do think there are several different factors that could make CRE defaults a challenging issue for smaller banks this cycle. First, large banks have generally stepped back from CRE lending since the GFC, while smaller banks (i.e., those with $100 billion or less in assets) have taken market share. In fact, CRE loans now account for roughly 30% of all assets at smaller banks, versus just seven percent at large banks.

Second, a lot more of smaller banks’ CRE exposure this cycle is to Office debt, which actually makes a big difference if we are right that CRE losses will be heavily concentrated in this asset class.

Finally, our research shows that there is a lot more floating-rate CRE debt outstanding versus the GFC. If the Fed really does hold short rates higher for longer this cycle, as our base case suggests, then lower debt-service coverage ratios (and more expensive cap renewals) could compress the timeline for CRE defaults, leaving smaller banks with less time to provision for losses and a potentially bigger ‘hole’ in their capital structure.

(…) As such, we think the current regional banking crisis could continue for some time, including the potential for more bank blow-ups and less bank lending to small businesses.

The good news, however, is that we do not think CRE defaults have the potential to cause significant stresses in the broader financial system this cycle, as the largest banks have less risky CRE debt on their balance sheets and remain well-capitalized, while life insurers have remained disciplined in how they construct their CRE portfolios.

• Apollo’s Chief Economist Says a ‘Default Cycle’ Has Begun Due to Fed Hikes Slok eyes rising delinquency rates on credit cards, auto loans

More Americans Are Getting Turned Down for Loans, Fed Data Shows

The rejection rate for loan applicants jumped to 21.8% in the 12 months through June, the highest level in five years, according to the latest edition of the Fed survey, which is published every four months. Overall credit applications declined to the lowest level since October 2020.

In the previous survey, published in February before the collapse of Silicon Valley Bank and other US lenders, the rejection rate was 17.3%. The increase since then has been broad-based across age groups, and highest among those with credit scores below 680.

In auto loans, for the first time since the survey began in 2013 the rejection rate — which climbed to 14.2% from 9.1% — exceeded the application rate.

What’s more, almost one-third of auto-loan applicants expected that their loan would be rejected, a record high. There were also steep increases in reported expectations that requests for new mortgages, mortgage refinancing or increases in credit-card limits would be turned down.

NY Fed report and charts here.

Total bank lending (black) has declined a net $30B in the last 6 weeks (through July 10), all from large banks (-$49.3B). The last time we saw such large consecutive declines was between November 2008 and March 2011.

Long-feared corporate debt woes start to hit home

(…) S&P Global expects default rates for U.S. and European sub-investment grade companies to rise to 4.25% and 3.6% respectively by March 2024, from 2.5% and 2.8% this March. (…)

Reuters Graphics

The current spread on the ICE BofA global high yield bond index is at 435 basis points (bps), down from 622 bps a year ago. (…)

Miller said 122 U.S. public and private companies with liabilities over $50 million have already filed for bankruptcy protection so far this year, implying a run rate that will cause bankruptcies to exceed 200 by year-end – comparable to that seen during the global financial crisis and COVID-19. (…)

ABN AMRO said the average maturity of European high yield corporate bonds reached a record low of almost four years in May, versus an average of just over six years between 2005-2007, when the European Central Bank also jacked up rates.

That means firms have less time than previously to refinance debt, so the pain of higher rates will be felt sooner. (…)

Here’s a long term chart of credit spreads:

But this is a resilient economy:

(…) our [GS] review of official and alternative data suggests that this growth rebound may have happened anyway. If so, the strong growth momentum to start the third quarter will help offset the mounting drag from reduced bank lending, which is now apparent in the H.8 data.

Official data indicate that domestic demand growth picked up sharply to +3.5% annualized in Q1—and with two months of data in hand—is tracking at +2.6% for Q2. We are also tracking GDP growth at +2.2% annualized in the first half of the year, slightly above potential.

High-frequency data from alternative sources is also upbeat. We seasonally adjust weekly credit card spending, housing demand, and industrial freight indicators through early July, finding that consumer spending continues to grow, manufacturing activity is currently bottoming or rebounding, and the large declines in housing activity appear mostly behind us.

(…) official data indicate that consumption in discretionary services categories rose at a solid pace in April and May (+0.5% and +0.4%, respectively), and the Affinity Solutions consumer panel suggests continued—and potentially larger—gains in June and early July. (…)

The 2023 income arithmetic also remains supportive: we forecast +4% year-on-year in Q4 in real terms, thanks to continued job gains, strong wage growth, and a boost from the indexation of social security checks and other transfer payments to prior-year inflation. And encouragingly, for the moment both jobless claims and WARN layoff notices are moving back down. We expect the consumer will continue to support growth in 2023—despite a 0.2-0.3pp drag from the return of student loan payments and a likely rebound in the savings rate. We forecast consumption growth of +2.1% on a Q4/Q4 basis—and +1.5% annualized in the second half of the year. (…)

Shale Industry Is Dropping Drilling Rigs, Fast Smaller fracking companies are feeling the pinch of inflation, lower oil and gas prices, and fewer prime drilling spots.

(…) The number of rigs drilling for oil and gas has dropped to about 670 from around 800 at the beginning of the year, with private drillers accounting for roughly 70% of the decrease, according to David Deckelbaum, an analyst at investment bank TD Cowen.

The slowdown augurs tepid U.S. crude-production growth for the rest of the year, analysts said. Even though larger public companies mostly aren’t shedding oil rigs, they aren’t growing rapidly either, as they adhere to investors’ desire for capital restraint. The Energy Information Administration expects domestic growth output to increase by fewer than 300,000 barrels a day in 2024 from this year.

Taylor Sell, chief executive of Element Petroleum, said the company’s break-even—or the price needed to fund drilling without a loss—had increased by between $5 and $10 to reach between $55 and $60 a barrel, in part because the cost of materials such as steel pipes remains high, at roughly 40% more than 18 months ago, he said. (…)

Russia’s invasion of Ukraine, which pushed the U.S. benchmark past the $120 mark, saw private operators in the Permian Basin of New Mexico and West Texas commandeer about half of the rigs in that region, fueling a quick rebound in U.S. oil production. (…)

Small frackers have largely exhausted their best wells, The Wall Street Journal reported last year. Most smaller producers in the Permian Basin of West Texas and New Mexico on average have around six years of drilling locations that could generate returns at low prices, according to data provided to the Journal by energy-analytics firm Enverus.

The result has been a private-company pullback in shale regions across the country. In the Permian, private drillers’ share of rigs has shrunk to 42%, according to Enverus—a level not seen since May 2021.

Inflation and less-productive wells have increased the average break-even for companies in the Delaware portion of the Permian more than 34% since 2021 to $43 a barrel, according to Enverus. In the Permian’s Midland region, the average break-even increased more than 39% over that same period, to $47 a barrel.

While U.S. oil prices have averaged about $75 a barrel since the beginning of the year—a level that generally allows profitable operations for smaller drillers—weak natural-gas prices have eaten away at their cash flows, executives said.

Companies are also dealing with limited pipeline capacity, leaving some no choice but to flare a large chunk of gas production that they can’t bring to market, they said.

“$70-$80 [oil] is fine—if we can just get paid for our natural gas,” Pruett said.

Bigger companies have also become more efficient, allowing them to remain profitable even when oil prices slip. Pioneer Natural Resources and Devon Energy all have said their break-evens fall under $50 a barrel. (…)

BofA Survey Shows Rising Soft Landing Bets, Rush to Big Tech

(…) The firm found that 68% of surveyed fund managers expect an economic slowdown without a recession, while corporate profit expectations are now the least pessimistic since February 2022. In another sign of improving risk sentiment, investors are underweight global stocks by the smallest amount so far this year, according to BofA.

Being long big tech stocks topped the list of most crowded trades, while 42% of polled fund managers say AI will increase profits over the next two years. Investors now see the Federal Reserve reducing interest rates in the second quarter of 2024, according to BofA; in last month’s survey they predicted a cut in the first quarter.

While some Bank of America poll indicators pointed to increasing optimism, the bank’s broad measure of fund manager sentiment, based on cash positions, equity allocation and economic growth expectations, remains “stubbornly low,” strategists led by Michael Hartnett wrote. (…)

• Investors exited commodities, biggest underweight since May 2020
• Among surveyed investors, 48% predict start of global recession by the end of the first quarter of 2024, while 19% say no recession in next 18 months
• Biggest tail risk is high inflation keeping central banks hawkish, following by a bank credit crunch and global recession, worsening geopolitics and AI/tech bubble, with systemic credit event coming in last (…)

Goldman Sachs cuts probability of US recession in next 12 months

Goldman Sachs’ Chief Economist Jan Hatzius said on Monday the bank was cutting its probability that a U.S recession will start in the next 12 months to 20% from an earlier 25% forecast.

“The main reason for our cut is that the recent data have reinforced our confidence that bringing inflation down to an acceptable level will not require a recession,” he said in a research note. (…)

“We do expect some deceleration in the next couple of quarters, mostly because of sequentially slower real disposable personal income growth … and a drag from reduced bank lending,” Hatzius said. However, he expected the economy to continue to grow, although at below-trend pace. (…)

China Evergrande’s overdue results show steep losses, liabilities

China Evergrande Group, the world’s most indebted property developer, posted a steep net loss of $14.8-billion in 2022 and a rise in total liabilities in its long overdue results on Monday. (…)

Evergrande reported a net loss of 476 billion yuan ($66.36-billion) and 105.9 billion yuan ($14.76-billion) for 2021 and 2022, respectively, versus a net profit of 8.1 billion yuan in 2020 when its operation was normal.

The huge losses were caused by return of lands, writedown of properties, losses on financial assets and finance costs, it said.

Its total liabilities amounted to 2.4 trillion yuan last year, an increase of 23 per cent from 2020, while total assets were worth 1.8 trillion yuan, down 20 per cent.

Revenue dropped 55 per cent to 230.1 billion yuan in 2022 from 2020.

Its auditor, Prism Hong Kong and Shanghai Limited, however said in the report it does not express an opinion on Evergrande’s financial statements, because it has not been able to obtain sufficient appropriate audit evidence to provide a basis. (…)

Bloomberg adds that Evergrande’s biggest liabilities are from trade and other payables, which stood at around 1 trillion yuan as of December, underscoring how the whole real estate ecosystem is impacted.

Mounting lawsuits and pressure to deliver projects are also weighing on the developer. Evergrande faced 1,601 lawsuits involving 383 billion yuan related to its mainland property unit as of May, it said in an earlier filing.

NikkeiAsia reports that a seller recently had to cut her price 10.4% before a potential buyer showed up:

(…) The number of properties on the existing-home market jumped 25% between the start of the year and early June, according to the E-House China R&D Institute, a real estate think tank. The sharpest jump, at 82%, was seen in Shanghai, China’s biggest local economy. (…)

“We managed to close one sale in April, but haven’t had a single one since May,” Wang said. The agent feels that more prospective buyers are opting to wait until the market bottoms out.

In last quarter’s urban depositors survey by the People’s Bank of China, 16.5% of respondents expected housing prices to fall over the next three months, marginally more than the 15.9% who saw an increase.

The numbers suggest that people are worried about a vicious cycle fueled by low transaction volumes and potential buyers spooked by sliding housing values. According to Wang, people who held multiple homes for investment purposes suddenly decided to offload those properties at a loss.

“They couldn’t foresee any profit off sales,” said Wang. “The hope that the housing market will rise again wanes the further we go up the socioeconomic ladder,” Wang added. (…)

The myth of the never-ending housing boom in China is steadily crumbling in higher-tier cities as well. There are concerns that the real estate market will suffer a prolonged, structural correction if the appetite for purchasing homes weakens visibly.

A known unknown morphing into a known known, perhaps even a huge black swan in slow, but accelerating, motion.

U.S. Companies Score Partial Reprieve From Global Minimum Tax Deal New agreement will delay until 2026 some potential tax increases under the deal

Under the updated agreement negotiated by the Treasury Department, companies will have an extra year—until 2026—before foreign countries can start imposing new taxes on any U.S. companies deemed to pay too little tax in the U.S. And the clean-energy tax credits at the core of last year’s Inflation Reduction Act will be counted in a more favorable way than some companies had feared, offering certainty as a tax-credit trading market gets under way.

The Organization for Economic Cooperation and Development, which is leading the talks, detailed the changes Monday in technical guidance after negotiations among countries.

The U.S. and about 140 other jurisdictions agreed in late 2021 to impose a 15% minimum tax on large companies in each country where they operate. Negotiators, including Treasury Secretary Janet Yellen, hailed the deal as a landmark achievement in international cooperation and a bulwark against corporate tax dodging. (…)

The 15% minimum tax must be calculated consistently across countries and companies, requiring clear definitions of income and taxes. That has led to a series of technical rules, including Monday’s 91-page update.

Some countries—Japan, South Korea and members of the European Union—are forging ahead with minimum taxes under the deal, but the U.S. isn’t. After negotiating the deal, the Biden administration couldn’t push the changes through the Democratic-controlled Congress last year. Republicans, who now lead the House, oppose the deal, calling it a global tax surrender.

The U.S. has a 10.5% minimum tax on U.S. companies’ foreign income that was created in 2017 and a 15% minimum tax on large companies’ global profits that was enacted last year. Neither conforms to the global deal, however. So as the OECD hammers out the rules, the U.S. has looked for ways to make the country’s system fit the international framework. (…)

If other countries move ahead and the U.S. doesn’t, the U.S. could lose $122 billion in revenue over a decade compared with less widespread implementation, according to the nonpartisan Joint Committee on Taxation.

Part of Monday’s guidance addresses a provision scheduled for 2025 called the Undertaxed Profits Rule, or UTPR. The UTPR is a way to make sure companies based in countries outside the deal still have to pay 15%.

Under the UTPR, a foreign country can look at a company’s tax rate in every country and, if that isn’t 15%, charge more in taxes. For example, France could see that a U.S. tech company is paying a 10% rate to the U.S. and require it to pay more to France. Monday’s guidance delays that rule until 2026 in countries where the tax rate is at least 20%. The U.S. corporate tax rate is 21%; the delay gives Congress time to address this with other expiring tax provisions in 2025. (…)

U.S. lawmakers have objected, arguing that the deal undermines Congress’ ability to offer tax incentives. Monday’s guidance doesn’t change what happens to research credits. But it acknowledges a need to respond to the size and scale of the IRA tax credits, which are worth hundreds of billions of dollars and can be sold from renewable-energy developers without tax liability to companies looking for tax breaks.

That market—where large companies will likely buy tax credits for 90 to 95 cents on the dollar—is just getting started. The update to the deal set out rules for all tradable tax credits, including IRA credits. For those buyers, the U.S. credits likely will be treated so that only the net benefit—the gap between the tax credit and the purchase price—is considered a tax cut.

That will give more confidence to companies considering purchasing the credits, ensuring that they can use them without pushing their tax rates too low and triggering foreign taxes.

The Treasury Department said that it welcomed the guidance and that the IRA’s transferable credits would be treated like refundable credits, which companies can convert into cash. (…)