Part 14/19:
A crucial concern is an impending wave of corporate and municipal defaults as maturing low-coupon bonds from 2020-2021 come due, with their value collapsing from issued price to distressed levels. McDonald estimates that as these debt instruments reset at higher rates, default rates could accelerate, especially if the Fed resumes rate hikes or financial conditions tighten.
He points out that many companies refinanced during the low-interest period, only to face much higher borrowing costs upon maturity, potentially triggering a cascade of defaults. The scenario resembles a ticking time bomb, with the timing possibly imminent—late 2025 or early 2026—if current trends persist.