U.S. corporate defaults and bankruptcies stayed muted in the first five months of this year but market volatility, rising interest rates and a potential economic slowdown are making investors nervous about low-rated debt.
Debt defaults were relatively avoidable for much of the past two years as the Federal Reserve kept interest rates at ultralow levels, a trend that continued early this year. Even troubled companies have been able to borrow in a supportive credit market. Yield-hungry investors have helped stave off defaults, finding ways for businesses to take on more debt and delay a financial reckoning.
