Deutsche Bank “sees” the coming wave of bankruptcies USA And Europe, a sharp increase in the number of defaults in the coming months, although the numbers are not terrible yet. A wave of bankruptcies is predicted in a related report by Jim Reid and Steve Caprio, strategy analysts at Germany’s flagship bank, who completed the bank’s 25th annual default survey.

Last year’s report rightly called the end of an era of very few bankruptcies, though the numbers aren’t terrible yet. The default rate on high-yield US bonds in April has already increased from 1.1% to 2.1%. At the same time, the default rate on loans in the US increased from 1.4% to 3.1%. In Europe, the corresponding bankruptcy rates rose from 1.7% to 2.7%. According to the rating agency Fitch, the average default rate of high-yield companies in the US is 3.6%.

However, according to her team Deutsche Bank“a wave of bankruptcy is inevitable.”

A direct relationship has been revealed between the growth of bankruptcy rates and the transition of the Fed and the ECB to a restrictive monetary policy.

By the fourth quarter of 2024, the default rate on high-yield loans in the US will peak at 9%, and the default rate on loans will reach 11.3%, the two strategists estimate. The corresponding European rate is also expected to rise, but less sharply, to 5.8%.

Deutsche Bank analysts see a direct link between the rise in bankruptcies and central bank policy. As they explain, “The move by the Fed and the ECB to the most restrictive monetary policy they have implemented in 15 years comes amid increased corporate leverage based on an extended rate of return. This is especially true of the leveraged loan market,” as leveraged buyouts increased in the context of zero interest rates and quantitative easing, reaching $5 trillion in the private equity sector. dollars, according to analysts at Deutsche Bank.

As, however, comments Marketwatch, central banks are not going to take on the rescue, as they still have a priority is the fight against inflation. And for the US in particular, the US debt ceiling deal effectively sacrifices any possibility of fiscal support until the next US election.