Closing the gap?

Sources: Bloomberg, Moody’s, and Wells Fargo Investment Institute. Quarterly data from January 1, 1986 to June 30, 2022. Q3 2022–Q2 2023 speculative grade default rate forecasts from Moody’s forecasts, as of September 30, 2022. The nonfinancial corporate debt data includes both High Yield (HY) and investment-grade (IG) corporate debt. GDP = gross domestic product. 

Key Takeaways

  • Ample liquidity has allowed many high-yield issuers to refinance , extend maturities, and lower interest expense.
  • Looking ahead, we expect high-yield default rates to rise over the next 12 months as liquidity and financial conditions tighten.