The trailing 12 month global speculative-grade corporate default rate continues to decline, finishing the fourth quarter of 2011 at 1.7%, slightly down from 1.8% in the previous quarter and 3.2% a year ago.
In the U.S., the speculative-grade default rate edged lower from 2.0% in the third quarter to 1.8% in the fourth quarter, but in Europe the default rate almost doubled from 1.4% to 2.7%. A year ago, the default rate was higher at 3.4% in the U.S. but lower at 2.3% in Europe.
... the global speculative-grade default will rise to 2.9% by the end of 2012. ... the global default rate could rise to as high as 8.5% in a pessimistic scenario if the U.S. recovery stalls and the European debt crisis deteriorates materially.
By region, ... the default rate will climb to 2.8% in the U.S. by end of 2012 under its baseline scenario, versus 3.7% for Europe. Across industries over the coming year, ... default rates to be highest in the consumer services sector in the U.S. and the business services sector in Europe.
"Default Rate Falls in U.S., Rises in Europe"
ReplyDeleteBy Michael Aneiro
http://blogs.barrons.com/incomeinvesting/2012/01/10/default-rate-falls-in-u-s-rises-in-europe/
The trailing 12 month global speculative-grade corporate default rate continues to decline, finishing the fourth quarter of 2011 at 1.7%, slightly down from 1.8% in the previous quarter and 3.2% a year ago, according to Moody’s Investors Service.
ReplyDeleteThe slight overall decrease masked an underlying variation in the default rates in the U.S. and Europe. In the U.S., the speculative-grade default rate edged lower from 2.0% in the third quarter to 1.8% in the fourth quarter, but in Europe the default rate almost doubled from 1.4% to 2.7%, Moody’s said. A year ago, the default rate was higher at 3.4% in the U.S. but lower at 2.3% in Europe.
“The story of 2011 is how few defaults were recorded, despite generally weak macroeconomic fundamentals and high levels of credit spreads more typically associated with distress,” Moody’s writes. “However, our default rate forecasting model suggests that the global default rate is likely at its cyclical bottom right now and the days of very low defaults are probably coming to an end.”
Under its baseline scenario, Moody’s predicts that the global speculative-grade default will rise to 2.9% by the end of 2012, still well below the historical average of 5%. Moody’s warned the global default rate could rise to as high as 8.5% in a pessimistic scenario if the U.S. recovery stalls and the European debt crisis deteriorates materially.
By region, Moody’s anticipates the default rate will climb to 2.8% in the U.S. by end of 2012 under its baseline scenario, versus 3.7% for Europe. Across industries over the coming year, Moody’s expects default rates to be highest in the consumer services sector in the U.S. and the business services sector in Europe.