bondIT, a provider of credit analytics and next-generation investment technology, has published its quarterly credit risk forecast, indicating an elevated credit risk across the globe.
The analysis predicts the downgrade and upgrade probability of nearly 3,000 rated corporate and financial issuers worldwide within a 12-month time frame. In contrast to previous quarters, its latest credit risk analysis sees an elevated concentration of industry risk in the medium to high-risk bracket. Moreover, the risk of ‘falling angels’ – firms that are moving down a credit rating – has risen across the globe. It says 13.4% of BBB-issuers analysed by bondIT are at risk of losing their investment grade rating within the next 12 months, an increase of nearly two%age points compared to the previous quarter.
The probability of re-ratings is highest in emerging markets (EM) where nearly a quarter of BBB-rated issuers display a high or very high downgrade risk. Rising inflation and economic uncertainty are exerting pressure on disposable incomes and affecting consumer spending, further compounded by increasing production and operating costs, creating a challenging environment for many companies. As a result, companies that manufacture or sell household goods and products are at the highest aggregate risk of rating downgrades in the next 12 months, respectively at 26% and 28% each, according to bondIT. The aggregated downgrade risk also remains high across many sectors such as airlines (19%), tourism (18%), and consumer goods (18%).
The findings are based on insights from bondIT’s credit analytics platform, Scorable, designed to help asset and wealth managers to anticipate critical rating changes ahead of the market. “While rising credit risk may present challenges, investors can still find opportunities to generate strong returns by effectively managing their exposures and building well-diversified portfolios,” said David Curtis, head of global client business, bondIT. “Anticipating directional credit changes early, regular risk monitoring and rebalancing, can help investors to stay on track towards their investment goals.”
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