Speaking Tuesday at the Milken Institute Global Conference in Beverly Hills, Calif., Mr. Ross noted one-third of first-time issuers had CCC or lower credit ratings and more than 60% of the high-yield bonds were refinancings over the past 12 months.
None of the capital was to be used for expansion or working capital, Mr. Ross said, just refinancing balance sheets. This means companies had no cash on hand to pay off old debt, he said.
“We are building a bigger time bomb” with $500 billion a year in debt coming due between 2018 and 2020, when the bonds might not be able to be refinanced as easily as they are today, Mr. Ross said.
The 10-year Treasuries are not even safe, Mr. Ross said, because if they revert to the average yield seen between 2000 and 2010, they will be down 23%.
“If there is so much downside risk in normal Treasuries,” what about high yield, Mr. Ross said.
“We may look back and say the real bubble is debt,” Mr. Ross said.