A Default Cycle Has Started

Apollo Chief Economist

Data for leveraged loan default rates and bankruptcy filings show that a default cycle has started, see charts below.

This is not surprising. The entire goal of the Fed with raising interest rates is to slow the economy down to slow down inflation, and adding tighter bank lending standards increases the risk that the slowdown could come faster.

Our latest credit market outlook is available here.

Source: S&P Capital IQ, Bloomberg, Apollo Chief Economist. Note: Bankruptcy figures include public companies or private companies with public debt with a minimum of $2 million in assets or liabilities at the time of filing, in addition to private companies with at least $10 million in assets or liabilities.
Leveraged loan index default rates starting to rise
Source: Pitchbook LCD, Apollo Chief Economist

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