Deutsche Bank: Long-term high interest rates could hit U.S. corporate borrowers
According to online reports, Deutsche Bank strategists wrote that as the impact of the Federal Reserve's postponement of interest rate cuts further expands in the future, higher borrowing costs will impact U.S. companies. Deutsche Bank wrote: Currently, expectations for a soft landing have led to most defaults taking the form of distressed asset exchanges with higher recovery rates. But with inflation above target, high policy uncertainty and rising sovereign term premiums, the possibility of a soft landing is declining." Deutsche Bank believes that in speculation-grade credit, default rates could reach as high as 5.5% around the middle of next year, meaning the issuer's weighted speculation-grade default rate will reach its highest level since 2012.
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