US high-yield bond and loan issuance has fallen sharply since Russia’s invasion of Ukraine, as investors turn more risk averse. While private credit lenders have an increasingly important funding role for leveraged middle market companies, the relationship with their private equity-backed portfolio companies is less transparent. Better terms among private credit lenders can also mask underlying risk.

Russia’s invasion of Ukraine has created new stresses for emerging market banks just as economic conditions were starting to recover post-pandemic. Some banking sectors will be harder hit than others.

Almost a quarter of emerging market companies’ credit quality would be at risk if the Russia-Ukraine conflict escalated, with consumer sectors most exposed and commodity producers set to benefit.

Four Moody's-rated corporate debt issuers globally defaulted in April, down from eight in March, and the trailing 12-month global speculative-grade default rate edged down to 1.9% from 2.1%. Our Credit Transition Model projects a modest rise in the default rate over the next year but risks are increasing as a result of inflationary pressures and the pace of monetary tightening.