UBS Credit Strategy Defaults Remain Low, But the Maturity Wall Is Drawing...

ab YES Power UBS ed by Evidence L ab Global Research 2 September 2026

Global Strategy Global Strategy

Defaults Remain Low, But the Maturity Wall Is Global

Drawing Closer Matthew Mish, CFA Strategist Sachin Ganesh 1. Defaults remain benign, but the story is increasingly about refinancing rather Associate Strategist than realized credit stress (Figs 3-19): We have three key takeaways. First, global HY/LL default counts were largely flat MoM, excluding a jump in EU LL defaults (three issuers), while higher-frequency (3-month) Henry Morrison-Jones debt-weighted default rates remain benign (US LL down 1.1pp to 1.0%, US HY up Strategist 0.2pp to 1.9%, EU LL down 0.5pp to 2.2%, and EU HY unchanged at 0.4%). Recent defaults continue to be driven primarily by idiosyncratic operational challenges layered on top of already leveraged capital structures rather than broad-based economic Julien Conzano weakness. Second, future refinancing needs along with higher rates are a building risk, Strategist with maturity walls over the next two years near cycle highs across three of the four markets, although roughly 75% of those maturities fall in 2028. Relative to current issuance run rates, the largest refinancing pressures appears concentrated in Software Bhanu Baweja and CCC-rated issuers, with Software facing the largest 2027 maturity burden. While Strategist near-term concerns around AI-driven disruption have eased recently, higher-for-longer rates places increased importance on market access and refinancing over the next two years. Third, higher frequency stress indicators for private credit remain broadly neutral. UBS Evidence Lab Corporate Bankruptcy Filings data showed a modest decline in private-company filings in August, with Healthcare remaining an area of pressure while Technology and Services improved. Distressed ratios remain elevated but contained, loan prices recovered across several technology-related sectors in August, and bankruptcy trends suggest that private-credit credit quality is not deteriorating materially relative to better-than-feared Q2 results. As a result, we see near-term risks to our private credit and LL default forecasts as modestly skewed lower. Finally, following Jackson Hole, we shifted our tactical preference for Q3 to leveraged loans over high yield, BBs over CCCs, and Financials, Consumer Non-Cyclicals, and Healthcare over sectors with greater duration or refinancing sensitivity. We remain cautious on long-duration IG, Technology, and lower-quality Retail credits. More broadly, we continue to expect credit-market dispersion rather than a broad-based selloff, with rates, maturity management, and refinancing access increasingly driving relative performance.

2. US HY records 1 default in August after 1 in July (Figures 24-28): The LTM (last 12mo) issuer and par default rates stand at 2.3% (+0.6 pp y/y) and 1.5% (+0.7 pp y/y), respectively. LTM recovery rates declined to 41% (-4 pp y/y), while default losses are 0.9%. We expect FY2026E default rates to stay at 2%.

3. US LL saw 2 defaults in August following 2 in July (Figures 29-33): The LTM issuer and par default rates are 2.4% (-0.9 pp y/y) and 1.5% (-0.8 pp y/y), respectively, with default activity staying inline with July. LTM recovery rates stand at 41% (-12 pp y/y), with default losses at 0.9%. We expect FY2026E default rates of 3%.

4. EU HY had no defaults while EU LL had 3 defaults in August (Figures 34-43): EU HY LTM issuer and par default rates decreased to 0.6% (-1.4 pp y/y) and 0.4% (-1.2 pp y/y), respectively, while recovery rates dropped to 30% (-13 pp y/y) and default losses at 0.3%. In EU LL, LTM issuer default rates surged to 2.8% (+2.0 pp y/y), highest since 2014, while par default rates climbed to 2.1% (0.2 pp y/y). LTM recovery rates fell to 40% (-34 pp y/y), with default losses at 1.2%. We expect FY2026E default rates of ~1% for EU HY and ~3% for EU LL.

This report has been prepared by UBS Securities LLC. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 13.

• Default criteria: bankruptcies, distressed exchanges, restructuring and missed payments where…