S&P Global expects to see a shallow US recession in 2023 with default rates more than doubling. As its base case, it expects a default rate of 3.75% if interest rates and consumer prices remain at elevated levels, translating to 69 high yield company defaults by September 2023. This compares to a default rate of 1.6% a year ago and a 10Y average of 3.1%. S&P’s pessimistic scenario would see 6% of HY issuers defaulting, the highest number since March 2021.

Last month, Fitch had projected a 2.5-3.5% default rate across US HY corporates due to macro headwinds and expectations of a recession. At the time, Fitch said that it expected 30 defaults and most of it to be concentrated across retail, telecom and broadcasting/media. As per their estimates, the 2022 YTD default rate stood at 1.2% and expected to close 2022 at 1.50-1.75%.

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