According to credit rating agency Standard & Poor, US default rates edged up sharply in February and has reached highest level since 2009, surpassing the levels seen during the collapse of Lehman Brothers. In February it has jumped to 3.3%, compared to 2.8% in January.
These numbers may not look big but one needs to consider FED's large balance sheet and near zero interest rates, which might be keeping a lid over the numbers. Moreover when conditions deteriorate these numbers could edge up pretty fast. Back in 2007, US corporate default rate was 1.02%, that edged up to 2.96% during Lehman collapse and a staggering 12% in 2009 before FED introduced easing. Standard & Poor is forecasting that default rates will edge closer to 4% by end of 2016.
Latest data shows downgrade is on the rise. In February S&P upgraded only 20 companies while downgrading 110, bringing the ratio to 5.5:1. Spread is also on the rise. Average spreads between CCC or lower corporates and US treasuries have reached more than 20%. This phenomenon is also impacting investment grade bonds, where spread is also on the rise.
US is at a critical juncture, when any adverse shock in the economy such as China hard landing could once again push it to the brink.


FxWirePro: Daily Commodity Tracker - 21st March, 2022
Firelight Launches as First XRP Staking Platform on Flare, Introduces DeFi Cover Feature
Japan’s Finance Minister Signals Alignment With BOJ as Rate Hike Speculation Grows
Dollar Slips as Weak U.S. Manufacturing Data Increases Pressure for Fed Rate Cuts
South Korea Posts Stronger-Than-Expected 1.3% Economic Growth in Q3
Australia’s Economic Growth Slows in Q3 Despite Strong Investment Activity
GM Issues Recall for 2026 Chevrolet Silverado Trucks Over Missing Owner Manuals
Gold Prices Steady as Markets Await Key U.S. Data and Expected Fed Rate Cut
U.S. Backs Bayer in Supreme Court Battle Over Roundup Cancer Lawsuits
Netflix’s Bid for Warner Bros Discovery Aims to Cut Streaming Costs and Reshape the Industry
Asian Currencies Steady as Markets Await Fed Rate Decision; Indian Rupee Hits New Record Low




