Santander Corporate & Investment | HY default rates remain low and are expected to remain so through 2022. The number of defaults in 2021 was the lowest in the last 10 years. There were 4 defaults in December, the same number as in November, mainly by Chinese construction companies; so the total number of defaults in 2021 was 54, well below the 216 in 2020 and 105 in 2019, and its lowest value in the last 10 years (since the 53 defaults in 2011).
Economic recovery and high liquidity levels are keeping default rates low, despite the impact of the pandemic, supply chain strains, labor shortages and high inflation. In addition, Moody’s expects the defaults environment in 2022 to remain benign, thanks to economic growth that it expects to stabilize and financing conditions that will remain largely favorable despite potential monetary tightening. As such, the default rate has continued to decline in December to 1.7% (vs. 2% in November and 3.3% pre-pandemic levels) and, looking ahead, Moody’s puts its 12-month global default rate forecast at 2.4%, slightly above its current rate.
By geography, December HY default rates have been set at 1.2% in both Europe and the US, while Moody’s expects a greater rebound in rates over the next 12 months in the US (to 2.6%) than in Europe (to 2.3%).