Junk Bond Defaults To Rise Five-Fold In 2008 From 26-Year Low

[hatrack]

Source: Bloomberg

Jan. 7 (Bloomberg) -- The global default rate on high-yield, high-risk bonds, which finished 2007 at a 26-year low of 0.9 percent, will jump more than fivefold by the end of 2008, according to Moody's Investors Service.

The high-yield default rate will increase to 4.8 percent this year and reach 5 percent by the end of 2009 because a weakening economy and ratings cuts will cause more issuers to miss their interest payments, Moody's analyst Kenneth Emery in New York said today in a statement.

``We believe December 2007 likely marks the low point of the current default rate cycle as several issuers have missed interest payments in recent weeks,'' Emery said in the statement. That ``should translate into upward pressure on default rates as the 30-day grace periods on these issuers' bonds expire and they become actual defaulters,'' he said.

Missed payments last week by Buffets Inc., the largest operator of buffet-style restaurants in the U.S., and Florida homebuilder Tousa Inc. raised concerns that corporate defaults will increase as a three-year housing slump slows the economy.



Read more: http://www.bloomberg.com/apps/news?pid=20601080&sid=aj_3ORE00bqQ&refer=asia

[RuleOfNah]

1. Is Neil Bush involved in this one too?

:banghead:

[PSPS]

2. They don't refer to them as "junk" for nothing.