Diane Ritter

US Corporate Debt Default Rate Could Top 23% by 2010

It is bizarrely inappropriate to state that the junk bond "default rate" will be 23%. They are predicting that 23% of the junk bonds in the index would default over 3 years time, 2008, 2009, 2010, which translates to a RATE of default of 6.7% in 2008, 7.8% in 2009, and 8.8% in 2010 (since they are predicting that 200 of the defaults will occur in the second half of 2009 and in 2010). Default rates of 8.8% aren't pretty, but they aren't out of line with other forecasts (I have heard predictions of up to 10% junk bond default rates). But saying that the DEFAULT RATE is 23% is just irresponsible scare mongering.