The high cost of borrowing is expected to lead to a rise in corporate defaults as interest rates remain at elevated levels. Over the past two decades, American companies have taken advantage of favorable interest rates to borrow extensively through loans and bond issuances. However, with eleven consecutive interest rate hikes by the Federal Reserve in a short span of time, many leveraged companies are now facing increased borrowing costs.
Even large international companies are feeling the impact, finding it costly to borrow abroad due to high interest rates in regions like the United Kingdom and European Union. The effects of these high interest rates are becoming evident in the form of troubled loans and bonds, leading to a surge in corporate default rates.
