Economic recovery and high liquidity levels are keeping default rates low, despite the impact of the pandemic, supply chain strains, labor shortages and high inflation.
In addition, Moody’s expects the defaults environment in 2022 to remain benign, thanks to economic growth that it expects to stabilize and financing conditions that will remain largely favorable despite potential monetary tightening.
As such, the default rate has continued to decline in December to 1.7% (vs. 2% in November and 3.3% pre-pandemic levels) and, looking ahead, Moody’s puts its 12-month global default rate forecast at 2.4%, slightly above its current rate.
By geography, December HY default rates have been set at 1.2% in both Europe and the US, while Moody’s expects a greater rebound in rates over the next 12 months in the US (to 2.6%) than in Europe (to 2.3%).