The Bank of Germany recently released its annual bankruptcy research report, which points out that a wave of debt defaults for U.S. and European companies is about to come due to radical interest rate hikes over the past year.

The report shows that the credit prosperity of the past two decades has allowed the markets to enjoy ultra-low interest rates and stable economic growth, and that financial institutions have also increased the size of loans during that period. However, the current steadily tightening of credit conditions will trigger a wave of defaults and potentially lead to a recession.

At present, signs of default have emerged, with the default rate of U.S. high-income bonds rising from 1.1 percent last year to 2.1 percent, and the loan default rate rising from 1.4 percent last year to 3.1 percent. The report predicts that in the upcoming peak period, the high-income bonds in the U.S. may have the highest default rate of 9 percent and the loan default rate of 11.3 percent. The European high-income bonds have the highest default rate of 4.4 percent and the loan default rate of 7.3 percent.

Bank of Germany analysts warn that its cyclical indicators indicate that the bankruptcy wave is coming, and that the Federal Reserve and the European Central Bank’s austerity policies are in conflict with high leverage, which makes it highly likely that bankruptcy risks will arise in the next 6-12 months, while austerity credit will not only drive the bankruptcy wave, but will also increase the likelihood of a recession.