Corporate defaults are likely to be 'far worse than the Bank of England's base case'

Reaction to increased defaults forecast

The Bank of England has forecast rising interest rates could create a higher risk of corporate defaults, but managers predict the reality will be much worse than the central bank’s outlook.

On Wednesday (23 August), the BoE noted its higher rates policy was "putting pressure on indebted corporates through higher debt servicing costs", which could in turn increase the likelihood of defaults on corporate debt. Mike Riddell, head of macro unconstrained at Allianz Global Investors, flagged the issue earlier in the summer to Investment Week, arguing he "totally agrees" with the bank's most recent warning, adding "in fact we think it is about to get far worse than the BoE's base case scenario suggests". He said: "Interest coverage ratios have given the impression of strong bal...