US bond defaults in October lead to rise in global default figures
The four corporate bond defaults during October were all US-based and amounted to $2.3 billion, the largest being the $1.3 billion default by Trump Atlantic City Associates. It is also the largest default this year and trumps the $1.25 billion default from the RCN Corporation. As a result, the global speculative-grade default rate for corporates has risen to 2.4% in November, its first rise since October 2003, according to Moody's. But not to worry, says the rating agency, which predicts it will fall back again to 2.3% by the end of the year before rising again in 2005.
So far in 2004, 33 issuers have defaulted on $10.8 billion, compared to 71 issuers defaulting on $31.9 billion of bonds in the same period for 2003. While the US default rate has seen an increase from 2.8% in September to 2.9% in October, European issuers haven't registered a single default since January with the default rate standing at 0.7%.
?The default rate may be approaching a cyclical low,? comments David Hamilton, director of corporate default research at Moody's. ?We expect the default rate to bottom out near 1.9% around March or April of next year before beginning to trend higher.