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Global default rates on the decline

The global speculative-grade corporate bond default rate has fallen for the fifteenth month in succession since the peak in January 2002, according to a Moody's report released today. Default rates fell to 6.1% in June, falling from 6.5% in May. The peak, in January 2002, stood at 10.9%.


The positive results have been recorded across a number of regions. The default rate for US domiciled issuers fell to 5.8% in June from 6.2% in May, while the European speculative-grade default rate fell to 10.9% from 12.8% in May.


David Hamilton, director of default research at Moody's, comments: "Even though aggregate credit conditions have improved since last year, the data still suggest an above average global default rate over the next year." And he suggests caution for the future: "Our forecasting model predicts that the default rate by number of issued will be unchanged for a year from now from the current 6.1%."


The second quarter of 2003 saw 20 Moody's rated issuers default on $8 billion of debt. The corresponding 2002 figures saw 40 issuers defaulting on $40 billion.

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