Global bond markets' weakest links

Rating agency explains why global default rates may edge up.

The global corporate speculative-grade bond default rate rose to 1.79% at the end of August, marginally higher than the eight-year low of 1.58% recorded in March 2005. The global speculative-grade default rate has remained below the long-term 1981-2004 average of 4.95% for 21 consecutive months, but is still higher than the record low of 1.28% posted in the second quarter of 1997.

The near-term default outlook has been mostly sanguine owing to expectations of relative economic stability, relatively favorable financing conditions, and healthy corporate profitability, with the global default rate edging up slowly from its trough before the end of 2005. In the US, results from a proprietary default forecast...

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