Chart of the week
After reaching a particularly low level at the end of January 2022 (1.20%), the default rate for the European high yield universe (calculated over the last 12 months) rose to 2.12% at the end of February according to Moody’s data. In its baseline scenario with a one-year horizon, Moody’s expects a slight increase in the default rate, albeit within a limited range of between 1.8% and 3%.
OUR ANALYSIS
The recent rebound is mainly linked to the simultaneous default of 8 Ukrainian banks, as Ukraine has imposed a moratorium on foreign currency payments. These bonds were previously rated B3 by Moody’s (High Yield universe).
However, there were no defaults in the euro-denominated high-yield corporate bond universe in February. In this market segment, the last payment incident observed was that of Intralot (a Greek company) in August 2021. Euro-denominated high-yield securities therefore present a risk of default that is certainly not zero, but is nevertheless contained and is largely covered at present by yield levels.
See also: https://latribune.lazardfreresgestion.fr/en/united-states-urgently-looking-for-houses-to-sell/
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The opinion expressed above is dated April 8, 2022 and is subject to change
*Sources : Moody’s and calculation from Lazard Frères Gestion
As of : April 8, 2022
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