Bonds

High-Yield Default Rate to Climb as Pressures Mount, Fitch Says

  • Fitch raises flags on junk issuers’ capacity to pay back debt
  • Forecasts HY default rate to be as high as 5% by year end
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Fitch Ratings Inc. is concerned about the ability of US junk-bond issuers to pay back their near-term obligations as the Federal Reserve continues to raise interest rates.

The credit grader expects the high-yield default rate to be as high as 5% by the end of this year, as banks pull back on lending and interest expenses weigh on company profits, according to a Tuesday report. Defaults by issuer count were 2.8% in July, up from 2.6% in June, the report said.