Although rate rises haven’t deterred North America’s borrowers and credit demand is holding up in many parts of Europe, financing conditions are tighter for emerging markets.
The U.S. speculative-grade default rate will likely continue to ebb. This could depend on how easily borrowers can adapt to further Fed tightening, tax code changes with debt-deterring elements and the waning positive effects on GDP of recent fiscal stimulus.
Easing credit standards in the Eurozone are enabling a debt-funded increase in mergers and acquisitions. On the other hand, Brexit uncertainties continue to impact investment and funding decisions, and borrower appetite in the UK.
Many emerging markets are feeling a financing squeeze as tighter bank lending conditions and exchange rate volatility threaten to raise domestic, as well as foreign currency borrowing costs.
Even as some risks warn of a turn in the credit cycle, many other leading indicators of near-term speculative grade defaults remain benign for the U.S.
U.S. Corporate Outlook: Stable For Now