Pressures continue to mount for lower-rated issuers as higher-for-longer interest rates, a possible recession, lingering inflation, narrowing debt maturity walls, and geopolitical risks weigh on credit quality. Approximately 40% of our North American speculative-grade issuers are rated 'B-' and below. Health care, high technology, business and consumer services, and telecommunications have half or more of their rated portfolio in these lower-rated categories. We expect the U.S. trailing-12-month speculative-grade corporate default rate will reach 4.5% by June 2024. The default rate could reach our pessimistic case of 6.5% (109 defaults).1 Year to date (YTD), as of Sept. 30, 2023, there have been 81 defaults, with the preliminary default rate (4.1%) reaching the long-term average (see chart 5). Many speculative-grade borrowers pushed out maturities in 2020 and 2021 when financing conditions were favorable.