Preqin: US credit default risk ‘set to peak by mid-2024’ amid rate cut expectations

Credit default risk in the US is set to peak by mid-2024 before beginning to decline in most sectors, with leveraged loans showing the highest projected default rate compared to 12 other US sectors, writes William Bennett-Lynch and Grant Murgatroyd for Preqin, citing Credit Benchmark’s 2024 Default Risk Outlook.

“The default risk outlook for US industries is largely tied to inflation expectations, with anticipated US Federal Reserve (Fed) rate cuts factored into the Credit Benchmark analysis. External geopolitical risks and economic malaise could still pose significant challenges to creditworthinessLeveraged loans have the highest projected default rates of the 13 sectors analyzed in the report, and the sector is not expected to reach its turning point until the end of 2024 or 2025.”

Preqin, January 24, 2024.

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Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.