Closing the gap?

Sources: Bloomberg, Moody’s, and Wells Fargo Investment Institute. Quarterly data from January 1, 1986 to September 30, 2023. Q4 2023 – Q3 2024 speculative grade default rate forecasts from Moody’s forecasts, as of December 31, 2023. The nonfinancial corporate debt data includes both High Yield (HY) and investment-grade (IG) corporate debt. GDP = gross domestic product. 

Key Takeaways

  • Ample liquidity in the recovery period post-pandemic allowed many high-yield issuers to refinance, extend maturities, and lower interest expense.
  • Looking ahead, we expect high-yield default rates to climb if the economic slowdown materializes further.