Fridson sees surge in high-yield defaults

Beginning in 2016, Fridson sees the high-yield default rate averaging 8.4% over the following four years - this compares to the long-run average of 4.5% and the current rate of just 2.5%. Putting those numbers in perspective, it means the number of issuers defaulting will be triple that during the 2008-09 crisis, and double the number defaulting in the 5-year surge beginning in 1999.

For those who have bid up junk bond prices to an average of 103.2 cents on the dollar, the average yield down to 5.8%, and remain focused on interest rate risk instead of credit risk ... you've been warned.


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Comments (9)
  • Nicholas Marshi
    , contributor
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    We usually have the greatest respect for Martin Fridson's comments on the High Yield industry, but this projection of an 8.4% average annual default rate over 4 years is absurd in every regard. This just shows that the financial news networks are so eager for new material to fill their 24/7 that every nonsensical uttering gets a hearing. In this case it's started with Barron's and therafter every news recycler in the universe. And you ask why regular investors have given up trying to make sense of the markets ? I wonder who at Barron's will be tasked in 2016-2020 to confirm the accuracy or otherwise of Mr Fridson's visions ?


    We're not saying we have a better prognostication.We saying that NO ONE (whether mathematician or not) can predict High Yield defaults with such accuracy years out (we're talking a time horizon as far as 7 years away). Yes, there will be a recession in the future, but the scope and date is unknown and unknowable. Furthermore, Mr Fridson's projection goes against the long term trend of High Yield defaults, which have been dropping in the last decade. This projection is the equivalent of crying out that there will be fire in a movie theater years from now...
    12 Nov 2013, 04:24 PM Reply Like
  • poclerk
    , contributor
    Comments (435) | Send Message
    Who is Martin Fridson?
    13 Nov 2013, 05:17 AM Reply Like
  • Joshua P
    , contributor
    Comments (21) | Send Message
    What's the basis for this statement? What is the empirical evidence?
    12 Nov 2013, 05:22 PM Reply Like
  • Hank890
    , contributor
    Comments (2269) | Send Message
    Did Fridson offer no comments on why he believes as he does? I am not inclined to give much credence to unsupported assertions. We know that interest rate risk is very high at the moment,....why is default risk climbing toward the sky beginning in 2 years? Based on what,...other than pure opinion?
    12 Nov 2013, 05:28 PM Reply Like
  • 7of9
    , contributor
    Comments (503) | Send Message
    Who is Fridson? Is he a fortune teller? he can predict the future?
    13 Nov 2013, 02:03 AM Reply Like
  • theo_rhetoric
    , contributor
    Comments (260) | Send Message
    Those that predict don't know. Those that know, don't predict. - unknown
    13 Nov 2013, 07:40 AM Reply Like
  • GizmoA51
    , contributor
    Comments (116) | Send Message
    Does this mean that the overall economy is getting worse, not better?
    13 Nov 2013, 08:08 AM Reply Like
  • poclerk
    , contributor
    Comments (435) | Send Message
    One more time: Who is Fridson?
    13 Nov 2013, 09:42 AM Reply Like
  • poclerk
    , contributor
    Comments (435) | Send Message
    Fridson is ''the Dean of high yield debt'' according to Wikkipedia.
    14 Nov 2013, 11:09 AM Reply Like
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