Data for leveraged loan default rates and bankruptcy filings show that a default cycle has begun. This is not surprising given that the Federal Reserve’s goal with raising interest rates is to slow the economy down to help lower inflation. Now that we’re in the early stages of a default cycle, the question looking ahead will be: How much will default rates rise? This is especially important for credit markets. The bottom line is that investors now need to carefully monitor whether this will be a soft or a hard landing.
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