U.S. high yield defaults hit record low

The default rate for U.S. high yield securities is at its lowest level on record, says Fitch Ratings.

In a new report, the rating agency said the trailing 12-month default rate for U.S. high yield issuers is down to just 0.3%, which is the lowest mark since records began in 2001.

“There have been no defaults in six of the past 12 months, including a record 103-day stretch that occurred over the third and fourth quarters of 2021,” said Eric Rosenthal, senior director at Fitch.

While it expects defaults to rise next month, Fitch said the default rate will remain low through 2023, “despite worries over inflation, supply chain challenges, continued pandemic uncertainty and rising interest rates.”

The health care, pharmaceutical, technology and retail sectors are all forecast to have default rates of 1% or lower in both 2022 and 2023, it noted.

The energy sector is projected to have a 0.5% default rate this year, before rising to 1.5% in 2023.

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