Bloomberg News

Moody’s Global Junk-Bond Default Rate Falls to 2.6% Last Quarter

January 09, 2013

The global default rate for high- yield debt dropped 0.6 percentage point in the fourth quarter to end 2012 at 2.6 percent, according to a report from Moody’s Investors Service.

The ratings company’s trailing 12-month global speculative- grade default rate fell from 3.2 percent in the third quarter and remains below the 4.8 percent historical average in data going back to 1983, New York-based Moody’s said. The rate is higher than the 1.9 percent recorded in 2011.

“The low interest rate policy pursued by the Fed and other central banks prompted both investment-grade and speculative- grade rated companies to sell more bonds,” Moody’s said in a report dated yesterday.

U.S. speculative-grade defaults fell to 3.2 percent in December, down from 3.6 percent in the previous quarter and compared with 1.9 percent at the end of 2011. High-risk, high- yield bonds are rated below Baa3 by Moody’s and lower than BBB- by Standard & Poor’s.

The worldwide total of corporate defaults rose in 2012, with 58 Moody’s-rated corporate debt issuers defaulting compared with 38 the prior year, the ratings company said. Ten defaults were recorded in the last quarter, according to the report.

The ratings company expects the global rate to rise to 3 percent by the end of this year, as the economic recovery remains weak and sovereign debt woes “will probably linger.” The rate should reach 3.3 percent in Europe and 3 percent in the U.S. in 2013, Moody’s said, with the advertising, printing and publishing industries leading defaults in the world’s largest economy.

To contact the reporter on this story: Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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