Company default rates could rise to levels not seen since the Great Depression because of the rapid deterioration in the global economic outlook since the collapse of Lehman Brothers.
The default rate for speculative or junk-grade debt could rise to 14.9 per cent by the end of next year, the highest level since 1932 when it peaked at 15 per cent, according to ratings agency Moody’s Investors Service.
This is the agency’s most pessimistic scenario, with the main so-called baseline forecast rising to 10.4 per cent for the end of 2009, a marked jump from a month ago when it was predicted to rise to 7.9 per cent. This jump is a result of expectations of a steeper US downturn, which will undermine growth across the globe.
Default rates rose to 10.5 per cent in 2001 following the dotcom crash and 12 per cent in 1991 after property prices slumped. The default rate is currently 2.8 per cent and expected to rise to 4.3 per cent by the end of this year.
Kenneth Emery, Moody’s director of corporate default research, said: “Our forecasts are now based on a deep and protracted US recession. The credit crisis has deepened with almost all economic data pointing to a much steeper slowdown.”
Emphasis added by me.
Moody's is full of shit.
Whatever they publicly state, double at the very least.
“With all due respect, sir,” Daniel told the C.E.O. deferentially as they left the meeting, “you’re delusional.” This wasn’t Fitch or even S&P. This was Moody’s, the aristocrats of the rating business, 20 percent owned by Warren Buffett. And the company’s C.E.O. was being told he was either a fool or a crook by one Vincent Daniel, from Queens. -- The End by Michael Lewis
Moody's is still fucking delusional.