Corporate debt has had a historically ugly start to the year
Corporate debt has had a terrible start to the year.
According to S&P Capital IQ's High Yield Bond blog, the rate of defaults for corporate debt year to date has reached levels not seen since the recession in 2009.
"With five more defaults last week, the global default tally for 2016 now totals 31 issuers, compared to 25 at this point last year, according to S&P," wrote High Yield Bond's Tim Cross. "As is clear in the chart, 2016 has the most YTD defaults since 2009, at the height of the post-Lehman financial convulsions."
This is not necessarily surprising as spreads for high yield debt blew out to recessionary levels to begin the year, though they have improved a bit in recent weeks.
Cross noted that ten of these defaults are from oil and gas companies, which is not surprising given the crash in oil prices and large levels of high yield debt in the sector.
Additionally much of the damage has come from US companies, with four out of last week's five defaults being American corporations Peabody Energy, UCI Holdings, American Media, and Templar Energy.
The good news, as we've noted before, is that there is a good chance that the defaults in the oil and gas industry will likely stay contained. So energy investors may get crushed, but the rest of the economy should be resilient in the face of higher defaults.
But for now, the chart certainly doesn't look pretty.
S&P Capital IQ/HighYieldBond.com