Moody’s: Default Rate Nears Peak
November 5, 2009
The 12-month global speculative-grade bond default rate rose to 12.4% in October from 12.3% in September, setting a new post-Great Depression high, according to a report issued by Moody’s Investors Service today. The last time the market saw default numbers like this was in July 1991, when the rate reached 12.2%.
The good news is that the rating agency believes we are reaching the pinnacle of the default mountain; it forecasts that the global speculative-grade rate will reach a peak of 12.5% next month, before starting a decline that will bring it to 4.2% by October 2010. Eight rated debt issuers defaulted in October, the lowest per month so far this year, according to Moody’s.
The U.S. speculative-grade default rate climbed to 13.4% in October from 13.2% in July. It was 3.5% at this time last year. Moody’s predicts the U.S. default rate will reach 13.6% this month and then drop to 4.4% by this time next year.
For leveraged loans, the trailing 12-month default rate increased to 10.8% in October from 10.4% in September. The leveraged loan default rate last year was 3%.
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