Through May 13, 2008, there were 28 defaults, affecting debt worth $18.9 billion, said an article published by Standard & Poor's. The article, which is titled "Global Bond Markets' Weakest Links And Monthly Default Rates,” says that this already exceeds the 22 defaults recorded in all of 2007. In addition, it is just two shy of the 30 defaults in 2006. Of the 28 defaults, 27 were from the U.S., and one was from Canada. The U.S. also leads in the number of weakest links--entities that are closest to the default threshold—with 107 entities or 82%.
"Our mean baseline forecast is for the U.S. speculative-grade default rate to escalate to 4.7% in the next 12 months from a 25-year low of 0.97% recorded at the end of 2007,” said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "The increase in defaults reflects the unfolding recessionary conditions, weaker earnings prospects, and continued financial pressures that will increase lending constraints.”
Continued financial-market volatility, tightening credit conditions, an unfolding housing correction, dollar weakness, and the risk of a larger or a smaller impact of the fiscal stimulus package contribute to substantial variability in the default forecast. A material risk remains that defaults could be significantly more pronounced and severe, especially if the recession would be deeper and longer than expected.
