Fitch Ratings Inc. is concerned about the ability of US junk-bond issuers to pay back their near-term obligations as the Federal Reserve continues to raise interest rates.

The credit grader expects the high-yield default rate to be as high as 5% by the end of this year, as banks pull back on lending and interest expenses weigh on company profits, according to a Tuesday report. Defaults by issuer count were 2.8% in July, up from 2.6% in June, the report said.

“Higher interest rates continue to challenge speculative-grade issuers seeking to address near-term maturities and other liquidity-related stresses,” Fitch said.

The forecast highlights how vulnerable non-financial high-yield issuers are to weakening global economic growth, inflation and rising rates, particularly compared to their investment-grade peers. Downgrades exceeded upgrades for Fitch-rated junk issuers since last year across most regions, the company reported earlier this month.

Health care is a sector of the highest concern for Fitch, with Bausch Health Companies Inc. dominating bond debt in the arena at $12.7 billion, according to the report.

“If Bausch were to file for Chapter 11, it would raise the health-care sector default rate to 15% from 4%,” the report said.

Bloomberg is in the process of reaching out to Bausch Health.

This article as provided by Bloomberg News.