Cash positions for US companies rated by S&P Global Ratings fell in the first quarter of 2024, marking an end to a yearlong streak of improvement.

The median investment-grade-rated company reported cash and equivalents falling to 21.48% of total liabilities, from 22.6% in the previous quarter, according to the latest S&P Global Market Intelligence data. This median cash ratio is a closely watched measure of liquidity and represents a company's ability to pay its short-term debt using cash and cash equivalents.

Debt has grown more expensive for companies as the US Federal Reserve holds benchmark interest rates at their highest level in decades. Monetary policymakers are weighing whether and when to cut rates, though many are wondering if the Fed will enact another hike as inflation has yet to cool to target levels and employment continues to grow by leaps and bounds.

The median speculative-grade-rated company also reported a deterioration in liquidity. The median cash ratio for this non-investment-grade set fell to 30.21% in the first quarter of 2024 from 33.77% at the end of 2023.

Median cash positions for both sets of companies remain above their recent lows.

Sector breakdown

Among investment-grade companies, cash ratios rose for companies in seven of 11 sectors — financials, healthcare, information technology, consumer staples, energy, real estate and utilities.

Information technology and real estate companies reported the highest gains in median cash ratios, at 6.70 and 5.31 percentage points, respectively.

By contrast, real estate was the only sector within the non-investment-grade space to report a liquidity improvement. Communication services and materials companies reported the sharpest declines in median cash ratios for speculative-grade companies, falling by 12.64 and 6.89 percentage points, respectively.