(Bloomberg) -- US finance leaders expect they will have to pay slightly more in 2024 and 2025 to refinance maturing debt but see funding costs decline after that, a survey by Duke University and the Federal Reserve Banks for Richmond and Atlanta found.

Chief financial officers anticipate that rolling over their debt will cost 120 basis points more in 2024 and 70 basis points more in 2025 than when they first took out the financing, according to the quarterly survey, which polled 443 finance executives at public and private companies across the country. 

“There will be a bit of a strain on companies having to pay that higher interest rate,” John Graham, professor of finance at Duke’s Fuqua School of Business and director of the CFO survey, said in an interview. “But companies expect interest rates to moderate.”  

Borrowing costs have dropped significantly over the past two months, with the cost of capital declining nearly 20% to 5.18% from a high of 6.43% in October, according to data compiled by Bloomberg.

The CFO survey, which was conducted from Nov. 14 to Dec. 1 — prior to comments from Fed Chair Jerome Powell that underlined the potential for 75 basis points in rate cuts in 2024 — shows monetary policy continues to be a worry for finance chiefs. Some 25% of respondents listed it as their main concern, alongside availability and quality of labor, down from 31% during the prior-year period.

“I was worried that CFOs would say they expect their refinancing costs for 2024 to be 300 or 400 basis points higher, but they didn’t,” Graham said, adding that executives’ concerns about interest rates appear to be easing compared with previous quarters.

More Optimistic 

The survey provides a more optimistic outlook for the new year than the fourth-quarter survey of 2022, with CFOs giving a rating of 58 when asked to grade their expectations about the performance of the US economy on a scale from 0 to 100. That’s up from 53 a year ago, but still below the historic average of about 60, according to Graham.

CFOs expect US employment to grow by 2.7% in 2024, up from the 2.2% forecast for 2023, while median revenue growth is seen to remain steady at 5%. Median price and unit cost growth are expected to slow to 3% and 4% respectively from the 5% level both were at previously, according to the survey. 

“The probability that firms assigned to a decline in economic activity has fallen considerably since the beginning of the year,” Sonya Ravindranath Waddell, vice president and economist at the Richmond Fed, said in a note. That, combined with the increase in optimism, “is a positive development for the business outlook for 2024.” 

©2023 Bloomberg L.P.