...Fitch Ratings recently revised its 2025 US default rate forecasts for leveraged loans (LL) to 5.5%-6.0%, up from 3.5-4.0% and for high- yield (HY) to 4.0%-4.5%, up from 2.5-3.0%. The higher rates result from the recent U.S. tariffs announcements which were significantly higher than anticipated. We now expect U.S. GDP growth of just 1.2% for 2025, coupled with rising inflation and a single 25 basis points (bp) Fed rate cut expected to occur in 4Q25. This creates a prolonged elevated-rate environment that will continue to pressure highly leveraged corporate issuers. The tariffs have created an uncertain economic environment, particularly around trade wars, consumer confidence, supply chain disruptions and business confidence. This uncertainty has caused a sharp decline in LL and HY activity, reduced liquidity and widened credit spreads. Although maturity walls have been extended across the LL and HY markets, the majority of debt set to mature in the next 12-18 months comes from issuers rated...
