HY default rates raised to 3.1%.

default David Fernandez

Moody’s HY default rate increased to 3.1% in April. In line with the progressive deterioration of the credit quality of companies globally. Moody’s published yesterday its monthly report where it states that there were 11 defaults in April so that, after the monthly record of 16 defaults in March (since December 2020), the balance in the first four months of the year amounts to 45 defaults. North America leads with 29 defaults (more than double the 13 in the same period of 2022), followed by Europe (9), Latin America (6) and Asia-Pacific (1). By sector, Business Services, Retail and Hotel, Gaming & Leisure are in the lead. Moody’s global HY default rate increased by 0.2pp in April to 3.1%, still low compared to its historical average of 4.1%.

And rates are expected to rise steadily: to 4.5% by the end of this year and to 4.9% in April 2024. Given the current context of rising interest rates and slower economic growth, as well as the progressive tightening of financing conditions. By geography, the European HY default rate stood at 2.7% in April and the US at 2.8%. Moreover, Moody’s expects the European rate to rise over the next 12 months to a significantly lower level of 4% vs. 5.7% in the US. This expected increase in default rates is in line with the current deterioration in credit quality, which is already evident in Moody’s rating drift series, where downgrades outnumber upgrades by 6% both globally and in the US. In Europe, however, upgrades still slightly outnumber downgrades by 2%.

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