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Junk Default Rate Is Highest Since Great Depression

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posted on Nov, 5 2009 @ 10:32 AM
If you thought we were out of this mess think again...

Nov. 5 (Bloomberg) -- The global speculative-grade default rate rose to 12.4 percent in October, the highest proportion of defaults since the Great Depression, according to Moody’s Investors Service.

The annual rate at which companies worldwide fail to meet their commitments may peak at 12.5 percent next month, Moody’s said in a report today. The New York-based firm revised its September figure to 12.3 percent, also higher than the 12.2 percent rate reached in 1991. The total number of defaults declined to eight in October, the lowest monthly count this year and down from 19 in September, Moody’s said.

If you thought we'd seen the end of sub-prime and junk bonds think again.

Even with the increased level of defaults, junk bonds in the U.S. returned almost 51 percent this year amid investor demand for higher yielding assets. The yield on the debt relative to Treasuries narrowed to 755 basis points yesterday, down from this year’s high of 1,886 basis points, according to Merrill Lynch & Co.’s U.S. High Yield Master II index. A basis point is 0.01 percentage point.

The promise of returns is just to great... Rules meant to be bent broken or outright disregurded in the quest for greater profit margins...
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