Default risks loom for nearly $2 trillion of junk-rated debt as US companies hit with higher interest rates

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Non-investment grade US companies face growing refinancing and default risks with interest rates expected to stay high and financial conditions for borrowers tightening, according to Moody's Investors Service.

Article originally published by Business Insider. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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16 Oct 2023

The ratings agency says about $1.87 trillion of junk-rated debt is maturing between 2024 and 2028. That signifies a 27% jump from the $1.47 trillion recorded in last year's study for 2023-2027.

Debt maturing in the next two years accounts for about 18% of the five-year total, Moody's said, though the absolute amount for those two years has surged 25% compared to last year's study, to hit $333 billion.

Moody's analysts expect the US speculative-grade default rate to peak at 5.6% in January 2024, before easing to 4.6% by August 2024.

«The increase — reflecting higher maturities for revolving credit facilities, loans and bonds — comes amid weak macroeconomic and credit conditions, raising companies' refinancing and default risk,» Moody's strategists said.

The heightened risks stem from the Federal Reserve's historic interest rate