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The end of US HY “mini” default cycle (almost completely commodity-driven) is approaching. Our regressions point to a significant fall in US default rates from the 6% area to 3.7% by December. No material deviation is expected from the still-benign European default cycle, which is likely to remain stable and low by historical standards in 2017, as well.
According to the latest numbers published by the rating agencies, in H1-2016 default rates accelerated with respect to 2015. However, globally defaults remained mostly concentrated in the US: 74% of the issuers that defaulted in the year to date were North American companies, 20% were from emerging countries, while only 6% were European companies.