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Lytle Michael John Tabula ETF

Tabula : huge increase in North American corporate credit defaults

Tabula ETF provider predicts huge increase in North American corporate credit defaults. Financial market indicators appear optimistic relative to both credit and economic indicators …

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Michael John Lytle  Tabula CEO


    YTD defaults in North American corporate credit are the highest since 2009

Michael John Lytle says investors should review their allocation to high yield US debt and develop investment strategies to hedge against a rise in defaults.

Below are some of the other points on this issue that he can discuss:

    Despite the recovery in equity markets the outlook for North American corporate credit paints a different picture; YTD defaults in North American corporate credit are the highest since 2009

    In March, Fitch raised its 2020 “base case” default rate for US high yield to 5-6%, with a “severe case” forecast of up to 10%, highlighting the energy sector as particularly vulnerable

    Moody’s optimistic scenario, published in April, sees defaults in North American speculative credit peaking at over 13% in March 2021. Their pessimistic scenario is for well over 20%

    S&P’s base case is for the 12-month trailing US speculative grade corporate default rate to hit 12.5% by March 2021 (vs 3.5% in March 2020); requires 233 companies to default.

Even in their optimistic scenario defaults will almost double (6% by March 2021 and 112 defaults). Pessimistic scenario sees default rate expand to 15.5% (with almost 300 defaults).

Source : ETFWorld.co.uk

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