Amid high interest rates, U.S. corporate liquidity began declining in the first quarter of 2024, S&P Global Market Intelligence said in a report Tuesday.

Reported cash and other liquid assets dropped to 21.5% of total liabilities for the median investment grade company rated by S&P Global Ratings, down from 22.6% in the fourth quarter of 2023.

This decline in corporate liquidity, which reflects the ability to pay short-term debt, is the first drop in a year, S&P said.

“Debt has grown more expensive for companies as the U.S. Federal Reserve holds benchmark interest rates at their highest level in decades,” it noted.

Speculative-grade companies also reported a deterioration in liquidity, S&P said.

For the median speculative-grade company, the cash ratio dropped to 30.21% in the first quarter, down from 33.77% at the end of 2023.

“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,” it said.