Given positive momentum with GDP, inflation, and interest rates in 2024, S&P Global Ratings expects defaults to decline in the fourth quarter but finish the year higher than 2023. This should push the U.S. trailing-12-month speculative-grade corporate default rate to 4.75% (80 defaults) by December 2024, S&P Global Ratings said in its article "U.S. Speculative-Grade Corporate Default Rate To Hit 4.75% By December 2024 After Third-Quarter Peak," published today.

This reflects a slight decline from our previous 5% projection through September. The proportion of 'CCC/C' ratings remains elevated, and we expect these firms to contend with weak cash flow and elevated interest expenses this year.

"We expect defaults in 2024 to largely come from consumer-facing sectors, such as consumer products and media and entertainment, as well as the still highly leveraged health care sector," said Nick Kraemer of S&P Global Ratings Credit Research & Insights.

Distressed exchanged will likely remain common as well.

Any downside surprise to the currently optimistic backdrop could push the default rate toward our pessimistic case of 6.75%; however, at this time a recession is looking less likely in 2024.

This report does not constitute a rating action.

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