Bangkok--20 Jul--Standard & Poor's
Speculative-grade corporate bonds have seen a strong rebound so far this year, said an article published today by Standard & Poor's.
The spread on Standard & Poor's speculative-grade index tightened 653 basis points (bps) this year and 760 bps since the spread peaked in mid-December 2008, according to the article, titled "U.S. Speculative-Grade Spreads Sector Index Review: Market Rally In The First Half Of 2009 (Premium)." The improvement in our spread index reflects a significant drop in liquidity risk and a decline in the probability of a long-drawn-out economic depression--which would produce apocalyptic default rates.
"Although spreads have tightened as market volatility has eased, aggregate credit quality is still in poor shape," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "The pool of companies that face significant default risk is large, with 13% of speculative-grade companies rated 'CCC+' or lower and another 15% rated 'B-' at the end of June."
Furthermore, we expect downgrades and defaults to continue. Downgrades have totaled 472 so far in 2009 but have slowed in recent months.
This article is part of our premium Global Fixed Income Research content, which is available to premium subscribers to RatingsDirect, at www.ratingsdirect.com. Ratings information can also be found on Standard & Poor's public Web site at www.standardandpoors.com; under Ratings in the left navigation bar, select Find a Rating. Members of the media may request a copy of this report by contacting the media representative provided.
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