Deutsche Bank: Long-term high interest rates could hit U.S. corporate borrowers

Higher borrowing costs will hit US companies as the impact of the Fed's delayed rate cuts widens further into the future, Deutsche Bank strategists wrote. Deutsche Bank wrote: Currently, the expectation of a soft landing has led to most defaults in the form of non-performing asset exchanges and higher collection rates. But in the context of above-target inflation, high policy uncertainty and rising sovereign term premiums, the likelihood of a soft landing is declining. "Deutsche Bank believes that in speculative-grade credit, the default rate could reach as high as 5.5% around the middle of next year, implying that the issuer-weighted speculative-grade default rate will reach its highest level since 2012.