Default statistics for October showed the global issuer-weighted speculative grade default rate fell to 3.7% from 4.0% in the prior month on a LTM basis, which is the 11th consecutive monthly decline, according to Moody’s data. The US default rate fell to 3.6% from 4.0%, while the European default rate decreased to 2.8% from 3.5%. On a par-weighted basis, the global default rate fell to 1.4% from 2.0% in September, while the US rate declined to 1.1% from 1.8% and European rate to 2.4% from 2.6%.
This information continues to support the risk buying habit of the market. Lower default rates lead to lower risk premiums (spread). The high yield sector continues to march forward, with issuance to date setting records. Spreads tighter, covenants looser - back to the future.
This is my effort to help fit the pieces together to get a better picture of the capital markets.
“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”
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