U. S. high-yield bonds in default reached the highest levels in at least six years as more energy companies buckled under pressure from stagnant oil prices.
Speculative-grade U. S. defaults spiked to 5.1 percent of the total outstanding in the second quarter from 4.4 percent in the first, according to a July 12 report from Moody’s Investors Service. The global high-yield default rate could finish the year at 4.9 percent, with the U. S. as much as 6.4 percent, Moody’s said.
Missed payments on high-yield or speculative bonds are already near levels that prevailed in 2009 and 2010, according to analysts at Moody’s and Fitch Ratings, who are forecasting defaults will get worse before they get better next year. At $50.2 billion, U. S. high-yield defaults have already surpassed the $48.3 billion total for all of 2015, and they’re on course to reach as much as $90 billion by year-end, according to a separate July 12 report from Fitch.
‘Defaults are still on the rise,’ Sharon Ou, senior credit officer at Moody’s, said in a phone interview. ‘The commodity-related sectors are still under distress.’
This post was published at David Stockmans Contra Corner By Emma Orr, Bloomberg Business ‘ July 13, 2016.
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