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S&P: Downside risks persist for BBB-rated issuers

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S&P estimates that debt associated with US and EMEA downgrades of fallen angels will increase over the next 12 months to $ 110 billion (close to the 10-year average), but could rise to $ 176 billion in the pessimistic scenario. . Market volatility and aggressive monetary tightening led “BBB” rated bonds to a sharp decline of more than 10% in overall yields in the US and Eurozone in the first half of 2022.

Rising inflation is putting a strain on consumer-related sectors in the US, while the disruption of Russian gas supplies is hitting EMEA sectors. Despite the challenges, the positive bias of forward-looking ratings remains broadly on a par with the negative one, as the sectors most affected by the pandemic enjoy a recovery in consumer demand and energy and mining companies benefit from high commodity prices.

As macroeconomic and geopolitical challenges rise, the positive momentum of ratings has slowed, likely reaching an inflection point, as issuers with “BBB” ratings face greater downside risks.

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