Banking tensions are likely to be limited to a small number of banks but will lead to a tightening of lending conditions and an uptick in business defaults, said a Bank of America (BofA) survey of credit investors published yesterday, March 26. April.
The gap between high-yield bonds and government debt has narrowed in 63% of the days to 2023, an all-time high, indicating that credit markets are performing well in the face of recent market turmoil, it said BofA.
Most of those surveyed in their latest study, this is around 36%, expect bank stress to be limited to small banks with questionable business models, with the US being more vulnerable than Europe due to differing regulatory oversights.
However, more than 20% believe that a credit crunch stemming from banking stress will cause a notable rise in corporate defaults.
