CREDIT CRUNCH AHEAD? Foreclosures rise 37%, corporate debt yields top 18%. Moody’s warns that AI borrowing is creating new refinancing risks in private credit

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The warning signs are showing up in several corners of the U.S. economy. Home foreclosures are rising, the weakest corporate borrowers are facing borrowing costs near crisis-era levels, commercial property delinquencies are increasing, and distressed business loans are approaching pandemic-era levels.

A MAJOR CREDIT CRISIS COULD BE BUILDING IN THE U.S.

The riskiest U.S. corporate bonds are now yielding over 18%, their highest level since the pandemic.

Just six months ago, these bonds were yielding around 13%.

That means companies with the weakest finances are now facing borrowing costs that could make refinancing their debt extremely difficult.

But what’s more concerning is the growing gap between strong and weak companies.

BBB-rated bonds are paying around 1.1% above U.S. Treasuries, while CCC-rated bonds are paying more than 13% above them.

And the stress is already spreading through the loan market.

According to JPMorgan:

• $139.8 BILLION in risky corporate loans are trading below 80 cents on the dollar, up nearly 90% in a year.

• $65 BILLION in loans are trading below 60 cents, up from $40 billion a year earlier and the highest since March 2020.

• Technology companies account for 39% of all distressed loans, or roughly $54.4 BILLION.

AI-related borrowing is also becoming a serious concern.

CoreWeave, one of the biggest AI infrastructure companies, has seen some of its bond yields climb toward 15%.

Its quarterly interest expenses have jumped from $267 million to $640 million in just one year.

The company has roughly $50 billion in debt and financing commitments to support its expansion.

Meanwhile, higher Treasury yields, persistent inflation and uncertainty surrounding the Iran war are making borrowing more expensive.

The problem is that many heavily indebted companies need to refinance their existing loans at much higher interest rates.

Some may not be able to afford it.

Active U.S. foreclosures jump 37%, reaching their highest level since 2019
https://mortgagetech.ice.com/resources/data-reports/first-look-at-september-2026-mortgage-data
ICE’s latest mortgage data show active foreclosure inventory rose 37% year over year, while completed foreclosure sales increased 15%. Serious mortgage delinquencies were also up 21% from a year earlier. The number of properties in active foreclosure reached approximately 303,000.

Investors pull back from the riskiest corporate debt as credit markets deteriorate
https://news.bloomberglaw.com/bankruptcy-law/total-meltdown-in-riskiest-debt-unnerves-market-credit-weekly
Bloomberg reported that the risk premium on U.S. high-yield corporate debt reached a 17-month high, while companies pulled the year’s largest batch of planned debt deals. One hedge fund focused on high-yield credit reported a 6.9% loss in the first half of October.

Distressed U.S. corporate loans reach their highest level since the pandemic
https://finance.yahoo.com/markets/stocks/articles/deeply-distressed-us-loans-rise-181049683.html
JPMorgan strategists reported that leveraged loans trading below 60 cents on the dollar rose to $65 billion, up from $40 billion a year earlier. The total value of distressed leveraged loans trading at or below 80 cents on the dollar reached $139.8 billion, nearly 90% higher than a year earlier. Technology accounted for $54.4 billion of the distressed loan total.

Commercial real estate delinquencies rise as refinancing pressure builds
https://www.mba.org/news-and-research/newsroom/news/2026/10/27/delinquency-rates-for-commercial-properties-increased-in-the-third-quarter-of-2026
The Mortgage Bankers Association reported that 4.97% of commercial mortgage-backed securities loan balances were delinquent in the third quarter, up from 4.82% in the previous quarter. Office properties continued to have the highest delinquency rates. The association warned that a large volume of upcoming loan maturities, combined with higher interest rates, will keep pressure on commercial property borrowers.

AI financing driving private credit growth as refinancing risks rise, Moody’s says
https://www.reuters.com/legal/transactional/ai-financing-driving-private-credit-growth-refinancing-risks-rise-moodys-says-2026-10-27/
Moody’s warned that the borrowing boom financing AI infrastructure is expanding private credit’s exposure to refinancing risk. Capital spending by the five largest U.S. hyperscalers and CoreWeave is expected to approach $1 trillion in 2027, while loans coming due from 2027 to 2029 could leave weaker borrowers struggling to refinance. Around 17% of 607 borrowers tracked by Moody’s were using payment-in-kind interest, allowing them to defer cash interest while adding to their debt burden.

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