11,014 Views
Deutsche Bank predicts an “imminent” wave of defaults in the US and Europe
He predicts it will peak next year.
In the US and Europe, the wave of defaults is expected to peak in the fourth quarter of 2024, Deutsche Bank economists predicted this Wednesday in their annual report, cited by the Financial Times.
“Our cycle indicators suggest that a wave of defaults is imminent,” the report said.
Furthermore, it explained that “over 15 years the policy of the Fed (US Federal Reserve) and ECB (European Central Bank) comes down against higher corporate leverage based on tighter profit margins”, which is “especially true”. leveraged debt market” which for years was driven by “zero (interest) rates and quantitative easing by central banks.”
Deutsche Bank also predicted that high-yield bond default rates in the US would rise to 9%, while the same loan index would reach 11.3%, nearly achieving the record of 12% registered during the financial crisis. Overall for the year 2007-2008. Meanwhile, Europe would be better off due to more fiscal support: these two indexes would rise by 4.4 and 7.3%, respectively.
Similarly, the German bank believes that the Federal Reserve will not help the US economy because the recession the US will enter will be more similar to the dot-com bubble of 2000 than the 2008 crisis.
“Corporate leverage is high.
And global debt markets derive more income from the production and sale of physical goods than from the real economy.
Going forward, higher inventory buildup and a shift in post-Covid demand from goods to services are likely to reduce pricing power in physical goods sales to corporations,” the economists found.
