Bangkok--5 Aug--Standard & Poor's
Despite global risk aversion making a comeback as a result of the sovereign debt struggles in Europe, the U.S. speculative-grade default rate fell to an estimated 5.5% at the end of July, said an article published Tuesday, August 3, 2010 by Standard & Poor's, titled "U.S. Credit Metrics Monthly: Default Activity Continues To Slow Through July (Premium)." This is down from a high of 11.3% in November 2009 and 5.93% at the end of June.
The default rate is still higher than its long-term average of 4.6% and remains a lagging indicator to the overall economy. Credit metrics in the U.S. are strengthening somewhat, though still at a pace indicative of caution among market participants.
"In July, four companies defaulted in the U.S., compared with 13 during the same period in 2009," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. All four companies were publicly rated. Of these, two were miscellaneous retailers, one was from the consumer/service sector, and one was a financial institution.
"The preliminary estimate for the U.S. 12-month-trailing speculative-grade default rate as of July 31 is 5.47%, almost half a percentage point lower than the 5.93% at the end of June," said Ms. Vazza.
We expect the speculative-grade default rate to decline to a mean forecast of 2.8% by June 2011, but it could reach 3.8% if economic conditions are worse than we expect.
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Media Contact:
Mimi Barker, New York (1) 212-438-5054,
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Analyst Contact:
Diane Vazza, New York (1) 212-438-2760