Goldman Sachs is raising its default forecast for U.S. high-yield, or "junk-rated," corporate bonds this year to 4% from 2.8% as more companies...
Goldman Sachs this week increased its default forecast for U.S. high-yield, or “junk-rated,” corporate bonds this year to 4% from 2.8% after more companies this year have been buckling under their debts.
The cloudier outlook for junk bonds comes as Wall Street feels the squeeze of tighter credit conditions, while bracing for the economic backdrop to get worse. Lotfi Karoui’s credit research team at Goldman said, “many investors are asking what the forward pipeline of defaults looks like from here,” in a weekly client note. Concerns have been elevated as corporate defaults jumped to start 2023, with more expected as credit conditions tighten after the failures of Signature Bank SBNY and Silicon Valley Bank.
“Those effects will be felt throughout the economy, and particularly in the case of leveraged companies.” See: Fed meeting shows focus on tighter credit conditions after bank failures. They already were at 2008 levels.
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