Hopefully. The below chart from Bank of America, showing the pretty high historical positive correlation between spreads and default rates. Click to enlarge.
Either: the market is broken; or we’re looking at a coming default rate spike more severe than that seen during the Great Depression. The global speculative-grade default rate for November has just been calculated by Moody’s at 3.1 per cent. Not particularly high, but certainly moving up. Already though, there’s a big addition for December: Tribune.
Related links:
Detroit bailout agreed in principle – FT
Tribune in bankruptcy filing - FT
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