The U.S. speculative-grade corporate default rate could rise to 4.5% by June 2024

S&P Global Ratings Credit Research & Insights expect the U.S. trailing-12-month speculative-grade corporate default rate to reach 4.5% by June 2024, from 3.2% in June 2023, S&P Global Ratings said in its article "The U.S. Speculative-Grade Corporate Default Rate Could Rise To 4.5% By June 2024," published today. We predict persistently higher rates will dent corporates' cash flow, particularly among weaker issuers.

"Consumer-facing sectors such as consumer products, media and entertainment, and retail/restaurants comprise a large portion of our weakest issuers," said Nick Kraemer of S&P Global Ratings Credit Research & Insights. "Resilient consumer spending over the year ahead will be critical, but we see early signs of strain."

Our optimistic scenario of a 2% default rate (33 defaults) could materialize if economic resilience continues alongside falling inflation, producing a "soft landing."

If a recession were to occur--particularly if inflation and interest rates remained stubbornly high--it could result in our pessimistic scenario, with a 6.5% default rate (109 defaults).

This report does not constitute a rating action.

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