Moody’s Sees Default Rate Falling

Moody’s expects the global speculative-grade default rate to drop to 1.9% by the end of this year, down from 3.1% at the close last year. “This projection is made under the baseline scenario, where the high yield spread is expected to fall and liquidity remains abundant,” says Moody’s. “This, of course, assumes that significant sovereign and financial problems will not develop in Europe.” The agency adds that if Europe slips into further chaos, the global default rate may reach as high as 6.1%. By sector, default rates are expected to be highest in the US consumer transportation sector and the European advertising, printing and publishing sector. The rate has compressed significantly since it hit 13.1% in 2009, up from 4.4% at the end of 2008. In the US, the speculative-grade default rate ended at 3.3% in 2010, down from 14.1% in 2009 and 4.9% in 2008. In Europe, the comparable rate closed at 1.9% in 2010, also down from 2009’s 11.3% and 2008’s 2.1%, says Moody’s. Comerci and Vitro are the only LatAm defaults it records from the last 12 months.