Our credit market research encompasses ratings performance indicators (including upgrades and downgrades, defaults, outlook changes, weakest links, rising stars, and fallen angels) alongside default and issuance forecasts and financing conditions coverage.
After defaults rose by 80% in 2023, we continued to see an elevated number of defaults to date in 2024, rising at their fastest pace since 2008. But a less obvious underlying trend is the rise in the number of issuers not defaulting for the first time. The increase in defaults and repeat defaults is, to some extent, driven by more entities becoming comfortable with high levels of leverage in their capital structure, many of which were set up during (and in anticipation of sustained) low rates.
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After a brief pause, net positive rating developments picked up again last week, with positive rating actions or outlook revisions outnumbering the negative ones, 20 to 15.
There were no defaults for the first time in four weeks, after two straight weeks with year-to-date highs of six each.
The addition of a fallen angel (property and real estate company Longfor Group Holdings Ltd.) and two risky credits highlight persisting risks to generally positive rating trends since February.
Credit pricing rose across the board as benchmark interest rates, bond spreads, and CDS spreads increased week on week, underscoring risks to credit performance.
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The count of upgrades more than doubled month over month in February (to 41), outnumbering downgrades for the first time since November.
Even as February had the first fallen angel of the year (with Brazil’s Braskem S.A.), rising stars continue to outnumber fallen angels by four to one this year.
Recent defaults are reducing the number of weakest links, which have dipped to 292 and are below the five-year average for the first time in a year.
An elevated number of defaults year to date doesn’t seem to be dampening sentiment in the credit market as the speculative-grade spread tightened to its narrowest since the global financial crisis.
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