Risky Trends: Retail Industry Tumbles as Bankruptcies Pile Up

By Luis Miguel Tejada With the global economy still reeling from the adverse effects of inflation and increasing borrowing costs, some industries have seen an increase in bankruptcies over the last few months. This increasing bankruptcy trend is evidenced by the growing average spreads of Credit Default Swaps (CDS) and is most notable in the Retail Industry (as shown in Figure 1).

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The retail industry has experienced a continuous decline in the average price of its institutional loans over the past four quarters. Notably, in the first quarter of 2023, the average price has reached its lowest level since the onset of the pandemic, as illustrated in Figure 2. This trend highlights how investors are evaluating the industry’s heightened risk exposure.

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