Wed, Sep 3, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Fitch: U.S. corporate bond downgrade rate 3% in second half 2009 vs 20% first half

Friday, February 19, 2010
Opalesque Industry Update - According to a new Fitch Ratings report, U.S. Corporate Bond Market: A Review of Fourth-Quarter and 2009 Ratings and Issuance Activity, the par value of U.S. corporate bonds affected by downgrades decreased for the third consecutive quarter in the last three months of 2009 to $42.9 billion or 1.2% of market volume, the lowest tally since the second quarter of 2007.

'With upgrades affecting $40.7 billion in bonds, the ratio of downgrades to upgrades was nearly even at year-end, a strong departure from rating activity in the first half of the year when downgrades towered over minimal upgrades' said Eric Rosenthal, Senior Director of Fitch Credit Market Research.

Downgrades continued to slow across the investment grade and speculative grade segments of the market at year-end.

The par downgrade rate (as a share of U.S. corporate bonds outstanding) was 23% in 2009, slightly below 2008's 24%. The vast majority, close to 90%, of the year's negative rating activity occurred in the first half of the year. For perspective, the par downgrade rate was 15.3% in 2001 and 23.4% in 2002.

The investment grade portion of the market experienced a downgrade rate of 20.1% in 2009 and the speculative grade segment, 34.7%. The share of bonds upgraded over the course of the year was 1.8% and 11.2%, respectively, across the two areas.

'The par downgrade rate associated with financial firms in 2009 was 36.5%, substantially higher than the downgrade rate of 12.7% recorded across industrials' said Mariarosa Verde, Managing Director of Fitch Credit Market Research.

Downgrades across financials had a particularly deep impact on the 'AAA' and 'AA' rating categories. At the end of the year, 'AAA' and 'AA' bonds had contracted to just 16.3% of market volume, down from 23.1% at the end of 2008 and 31.4% at the end of 2007.

The speculative grade portion of the market grew to 20.8% at the end of 2009, from 17.5% at the end of 2008 and 2007.

New issuance totaled $626.6 billion in 2009, up 3% year over year. Industrial issuance however grew 65% over the course of the year while financial issuance tumbled 55%.

The market's par rating composition at year-end consisted of the following: 'AAA', 0.7%; 'AA', 15.6%; 'A', 35.9%; 'BBB', 27.0%; 'BB', 8.2%; 'B', 6.8%; and 'CCC'-'C', 5.8%.-KM- To view full 20-page report, click Source

- KM -

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing
  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Study shows what resonates with investors: 'Unwavering', 'passionate' beats 'committed', 'dedicated' and more surprises[more]

    Komfie Manalo, Opalesque Asia: A new study by Pershing, a unit of BNY Mellon company, showed that an effective value proposition strengthens audience connections and fosters growth, yet many advisors have had little objective guidance in formulating such statements until now. In the study

  2. Legal – GE Capital and Petters-related hedge fund in legal battle, SEC sanctions Donald Brownstein's hedge fund over conflicts of interest[more]

    GE Capital and Petters-related hedge fund in legal battle From Startribune.com: A billion-dollar legal battle is brewing in Florida over who knew what and when about the decade-long Ponzi scheme operated by former Wayzata businessman Tom Petters. The bankruptcy trustee for two failed Flo

  3. Managed futures' global diversification is important in next phase of economic recovery[more]

    Komfie Manalo, Opalesque Asia: The global diversification provided by managed futures may prove to be extremely valuable as the markets enter the next phase of the economic recovery, said Campbell & Company, a pioneer in absolute return invest

  4. Comment – Why you should avoid the hottest hedge fund hands, Swedroe attacks Hussman over risk management, relative value strategy[more]

    Why you should avoid the hottest hedge fund hands FromCNBC/Yahoo.com: Investors who don't have money with Pershing Square Capital Management are likely salivating at the hedge fund's industry-leading 26 percent return from January through July. But investing with Bill Ackman and other to

  5. Ex-UBS prop trader's hedge fund Manikay Partners eyes UK launch[more]

    From eFinancialnews.com: Manikay Partners, a $1.7 billion US multi-strategy hedge fund set up in 2008 by a proprietary trader from UBS with backing from Goldman Sachs, is planning to open in the UK. New York-based Manikay's move into Europe comes after Financial News revealed on Monday that Aurelius