Sharply rising and higher-for-longer borrowing costs and the prospect of a U.S. recession in 2023 may further strain credit conditions. Credit rating trends have turned negative, and we now expect the U.S. speculative-grade corporate default rate to more than double, to 3.75%, by next September. The effects of high food and energy prices on discretionary spending are making it harder for corporate borrowers to pass through increased costs. And market liquidity--or the lack thereof--is a growing risk for many lower-rated borrowers.