S&P: Default Rate Projected at 5%
S&P’s 12-month baseline projection for the U.S. corporate speculative-grade default rate is now 5%
January 31, 2010
The year-end baseline speculative-grade default rate for this year is at 5% and could reach as low as 4.3% or as high as 6.9%, according to a report published Friday by Standard & Poor’s.
S&P’s 12-month baseline projection for the U.S. corporate speculative-grade default rate is now 5%. That could get as low as 4.3% or as high as 6.9%, given positive or negative economic conditions. “Only in the optimistic scenario does the default rate drop below the long-term average of 4.5%,” S&P analysts wrote in the report.
“Liquidity concerns have eased partly because of continued hefty support from the Fed, and healthy investor demand and impressive activity in the financial markets which have lowered refinancing risk,” said S&P analysts. “We remain concerned about market optimism getting ahead of fundamentals, wary about the return of questionable financial practices, and cautious that funding conditions might worsen once monetary stimulus is withdrawn, with a negative impact on corporate defaults, though the latter is greater in 2011 than 2010.”
The 12-month trailing speculative-grade default rate for December 2009 was 10.9%, within the range predicted by S&P at the start of last year.
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