Corporate Bond Default Rate Posts Largest Drop In Two Years

Moody’s Investors Service reported that the default rate for speculative-grade corporate bond issuers posted its largest one-month decline since July 2000 in August, falling 0.5% to a level of 9.6%. The default rate has fallen for six out of the eight months in 2002, a sign that defaults by corporate bond issuers are reluctantly beating a retreat. Moody’s also released updated and revised forecasts for the global speculative-grade default rate. According to the latest forecast, the speculative-grade default rate is expected to end 2002 near 9.8% — little changed from its current level — but falling to about 8.5% by August 2003. Seven issuers defaulted on a total of $10.2 billion of bonds globally in August. Three issuers were domiciled in the US. One each came from Brazil, the UK, Argentina, and Sweden. Year-to-date 2002, the dollar volume of rated and non-rated defaulted debt totals $139.5 billion, already surpassing 2001’s record $135 billion. August’s largest defaults were Conseco, Inc. ($5.1 billion) and Marconi Corporation, PLC ($3.3. billion).

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