- A full-blown recession and credit crunch could spur an 8% corporate default rate, BofA estimated.
- That would put nearly $1 trillion of existing corporate debt in distress, the bank said in a note.
- Investors have been worried about a recession as high rates and tighter credit squeeze the economy.
The impact of a recession and a credit crunch could be that $1 trillion worth of corporate debt ends up defaulting, Bank of America credit strategists said in a note.
"It has been a long time since we had a proper credit cycle," Oleg Melentyev wrote to clients on Friday, pointing to the credit cycles beginning in 1981, 2000, and 2007. Those cycles were upended by a dramatic tightening of credit conditions, leading the three-year default rate on US corporate default debt to soar to around 15%.