Junk Bond Default Rate Remains High

June 20, 2002 (PLANSPONSOR.com) - Investors steering clear of the equity market, have caused a liquidity crunch on the debt side, leaving the global high yield bond default rate in double digits, as cash-strapped companies struggle to service their debt obligations.

According to data from Moody’s Investors Service, the 12-month global junk bond default rate stood at 10.3% in May, the same level as in March and April, spurred by problems in the telecommunications sector and elsewhere.
Although the global default rate has not fallen as fast as anticipated, the US default rate has tumbled sharply, falling to10.4% in May from 10.9% the previous month, Moody’s noted.

Moody’s expects the global default rate to drop to about 8.1% by the end of the year and slip to 7.9% in 12 months.

Moody’s noted that on a global basis, 15 corporate bond issuers defaulted on $15.5 billion of bonds in May, down from 23 issuers and $19.5 billion in defaulted bonds in April.