The biggest buyers in the $8 trillion market for U.S. corporate bonds, including mutual funds, pension funds and life insurers, should be stress-tested to help prevent instability during a market downturn, according to a research unit of the Treasury Department.

Nonbanks are playing a growing role in the market for corporate debt at a time when the ratio of company debt to gross domestic product has surpassed 2007 levels and is approaching an all-time high, the Office of Financial Research said in a report Tuesday. Entities including mutual funds and insurers now own a quarter of all company obligations.

The increasing pile of company debt, brought on by years of low interest rates, is "a top threat to stability," the independent unit of the Treasury said in the report. Stress-testing firms under a scenario that includes severe corporate defaults and sharp declines in U.S. equity and commercial real estate prices could reduce security risks, according to the report.

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