Defaults reach above 5%, from 1.3% bottom in November 2018
Defaults on bonds issued by debt-laden U.S. companies with speculative-grade ratings are on pace to reach a new high this year for the post 2008 crisis era, according to Goldman Sachs analysts. The bank has tracked more than $36 billion of defaulted so-called “junk bonds” already in 2019, and there are likely to be more, particularly in the energy sector, to eclipse the prior post crisis default record of $43 billion in 2016, wrote Goldman analysts led by Lotfi Karoui in a Thursday note to clients. “Thus far, defaults have been highly concentrated among energy issuers, a trend that reflects structural as opposed to cyclical challenges,” the Goldman analysts wrote. “The lingering weakness in oil prices coupled with weak growth sentiment may push issuers in other structurally-challenged sectors toward defaults.” Oil field servicing company Weatherford International Ltd WFTIQ, -0.11%, which filed for bankruptcy with $7.4 billion of high-yield debt, is the year’s second-largest default, after the massive default of California’s Pacific Gas and Electric Company PCG, -5.46% on $18.3 billion of debt in January, according to Moody’s Investors Service. In the case of Weatherford, Moody’s said it expects to see bond recoveries of 35%-65% on roughly $5.85 billion of debt that the company hopes to slash through its restructuring. PG&E was considered an investment-grade credit, until it filed for bankruptcy following devastating California wildfires in 2017 and 2018 left it facing billions in potential liabilities. Moody’s said this week in a separate report that junk-bonds issued by companies in July came with the worst protections yet for investors. Investors have plenty of high-risk and so-called grey swan events to watch for, as the third quarter draws closer. In high-yield, a big focus will be corporate earnings through year-end. Companies can end up in default when earnings slump, making it harder for borrowers to keep up on debt payments. Nick Bit: In October i Begged you to buy the 30 year strip. It would have cost you $3,562.78 for a $10,000 face amount bond at the worst would have tripled your money.. Last week i told you to TAKE PROFITS my 2 most favorite words in the English language. That strip would have bought you $5,685.58 . A profit of $2122.80 of over 60% in 10 months. So tell me how much did that IRA, Etrade, Fidelity asshole make you? They try to put you into one of their super duper high yield junk bond funds that yield MAYBE 6% before they default and you LOSE your money. Are you not tired of them making a asshole out of you?