Fitch Ratings has raised its U.S. corporates institutional leveraged loan (LL) and high yield (HY) bond default forecasts, reflecting the tighter lending conditions and capital access resulting from stress in the banking sector and inflation uncertainty. These factors, along with higher borrowing costs are meaningful challenges to weaker issuers’ ability to address refinancing and liquidity needs. Therefore, we expect an increase in bankruptcy filings and distressed debt exchanges (DDEs). We have raised our 2023 HY bond default rate forecast to 4.5%-5.0% in 2023 from 3.0%-3.5%. Since January, on a net ...

The pace of interest rate hikes across major central banks showed little sign of slowing in May but the scale of the tightening tapered off, with growth woes and “sticky” inflation data prompting policymakers to tread more cautiously. All six of the central banks overseeing one of the 10 most heavily traded currencies and that met in May hiked rates. Central banks in Australia, New Zealand and Norway joined the European Central Bank, the Bank of England and the Federal Reserve in lifting benchmark rates last month by 25 basis ...

Market expectations for the Bank of England reminiscent of last year’s crisis UK investors would be forgiven for feeling a sense of déjà vu over recent days. An unexpectedly high inflation reading helped send market expectations for the Bank of England into territory last seen in October and November in the aftermath of the fateful ‘mini budget’. That remains true whether you look at the peak rate being priced (5.5%) or the spread between expected policy rates in the US and UK in 6-12 months. That equates to four more ...

U.S. domestic banks reported a widespread tightening of lending standards by the end of the first quarter of 2023 – even before the full impact of the regional banking crisis had been felt. Stricter lending criteria are likely to slow the flow of credit to small businesses and households – amplifying the impact of interest rate increases by the Federal Reserve over the last year. The net percentage of domestic banks tightening standards for commercial and industrial (C&I) loans to small businesses with annual sales below $50 million hit +47% ...

Large U.S. companies have been on a bond issuance binge but this rapid pace in supply may be hard to sustain ahead of expected volatility related to extending the U.S. debt ceiling and another possible move higher in interest rates. Investment-grade rated companies issued $152 billion in May, making it the busiest May since 2020 when the pandemic crisis prompted record debt issuance volumes, according to data from Informa Global Markets. Junk-rated companies meanwhile raised $22.1 billion, for the busiest May since 2021 when 73 companies raised $49.1 billion. “I ...

The U.S. Senate on Thursday passed bipartisan legislation backed by President Joe Biden that lifts the government’s $31.4 trillion debt ceiling, averting what would have been a first-ever default. The Senate voted 63-36 to approve the bill that had been passed on Wednesday by the House of Representatives, as lawmakers raced against the clock following months of partisan bickering between Democrats and Republicans. The Treasury Department had warned it would be unable to pay all its bills on June 5 if Congress failed to act by then. “We are avoiding ...

The European Central Bank (ECB) has gone through most of its monetary policy tightening to bring inflation back to its medium-term target of 2%, though the cycle is not quite over yet, ECB Vice-President Luis de Guindos said. “A big part of the journey has been done but there is still the last stretch,” De Guindos told Spanish radio station RNE. Shortly after his comments, ECB President Christine Lagarde said euro zone inflation remained too high, so further European Central Bank policy tightening was necessary. The ECB has raised rates ...

Euro zone inflation eased more than expected last month as underlying price growth also slowed, fuelling a debate about the need for further European Central Bank rate hikes beyond an increase later this month. Inflation in the 20 nations sharing the euro eased to 6.1% in May from 7.0% in April, below expectations for 6.3% in a Reuters poll of economists. The reading came as only a modest surprise for investors, however, as national data earlier this week foreshadowed the drop. Core inflation, which excludes volatile food and fuel prices ...

A new “reshoring” trend is set to upend global supply chains as firms look to source products — such as clothes and computer chips — closer to home, turning away from manufacturing powerhouses like China. Some executives even appear more concerned about manufacturing domestically than they are about the effect of artificial intelligence on their businesses. China, which has been at the center of global manufacturing for decade, is losing its dominance — and its factory activity declined in April and May. Meanwhile, Russia’s invasion of Ukraine and the aftereffects ...

China-focused venture capital fundraising is heading for its weakest first half year in at least eight years, data from researcher Preqin showed, as a teetering economic recovery and Sino-U.S. tensions unsettle investors and startups. Concern about the impact of a weak business environment on startups’ prospects and valuations means a turnaround in fundraising may take time as venture funds take longer to evaluate potential deals, investors and advisers said. “The current market presents bifurcated fundraising paths: U.S. dollar funds continue to face a challenging environment with their much more risk-averse ...

China’s cash-strapped local governments have suddenly rushed to an unusual corner of the debt market in Shanghai where ambiguous rules offer ways to skirt restrictions on onshore borrowing. Some analysts have described local government financing vehicles (LGFVs) as the “black hole” of China’s financial system, with debts of more than $9 trillion and rising. But Beijing is counting on their continued spending to help lift a patchy economic recovery. Sales by LGFVs of so-called “pearl bonds”, which are issued as foreign debt in Shanghai’s free trade zone, have soared to ...

German retail sales rose less than expected in April from the previous month, data showed on Thursday. The Federal Statistics Office said retail sales were up 0.8% month-on-month. Analysts polled by Reuters had predicted an increase of 1.0% on the month. Compared with April 2022, sales fell 4.3%. The federal statistics office publishes more details on its website. Source: Reuters (Reporting by Linda Pasquini, edited by Miranda Murray)

India’s factory output expanded at the quickest pace since October 2020 last month thanks to strong demand and output, while improved optimism led firms to hire at the fastest rate in six months, a private survey showed on Thursday. While regional peers such as China, Japan and South Korea have seen their manufacturers struggle for prolonged periods, solid growth in the sector has been one of the primary drivers of India’s economy over the past few quarters. The Manufacturing Purchasing Managers’ Index, compiled by S&P Global (NYSE:SPGI), rose to over ...

Germany’s manufacturing sector contracted at the fastest rate in three years in May and output fell for the first time in four months, a survey showed on Thursday. The HCOB final Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of Germany’s economy, fell to 43.2 from 44.5 in April, the fourth consecutive monthly decline and the lowest reading since 2020. The manufacturing PMI has been below the 50 level that separates growth from contraction since July 2022. Goods producers in the euro zone’s biggest economy faced ...

After months of negotiations, Finland’s Nokian Tyres was on the cusp late last year of finalising a 400-million-euro ($440.32 million) sale of its Russian business. Then Moscow changed the rules again. The government in December demanded that companies leaving Russia sell their operations for at least half price and claimed 10% of the sale for the federal budget, termed an “exit tax” by the U.S. Treasury. Nokian Tyres dropped the agreed sale price to Russian oil major Tatneft to 286 million euros, finally securing the approval of the government commission ...