Bankruptcies are spiking as companies lose hope of rate cuts

Corporate bankruptcies have risen sharply, with 66 filings in April, an 88% increase since January, according to S&P Global. This surge is due to dashed hopes for a quick Federal Reserve interest rate cut, as the fed funds rate remains at 5.25%-5.50%. Initial 2024 optimism for rate cuts by March has shifted to as late as December due to strong economic and inflation data.
High rates have pressured corporations, leading many to bankruptcy. Yields on junk-rated debt fell when a rate cut seemed likely but spiked again due to persistent inflation and a slowing GDP. The hardest-hit sectors are consumer discretionary, healthcare, and industrials. Analysts warn that prolonged unchanged monetary policy heightens economic risks.