Portfolio managers in the U.S. leveraged loan market have raised their forecasts for near-term default rates by almost 20 bps since the last quarterly survey, though few expect the historical average of 3.1% to be surpassed before the end of next year.
According to LCD’s Default Survey, conducted at the end of each quarter, the consensus now calls for a one-year forward default rate of 2.43%, from a one-year forward rate prediction of 2.24% at the December reading.
More than 50% of loan managers surveyed raised their one-year-out default prediction, by an average of 0.42%. In fact, LCD’s quarterly survey last revealed an increase of this magnitude back in 2016—when borrowers in the oil-and-gas and metals/mining sectors were increasingly inflating the default stats.
Meanwhile, predictions for the 12-month trailing U.S. default rate by principal amount for year-end 2019 came in at 2.81%, an increase from December’s read of 2.64%.
LCD’s U.S. Leveraged Loan Default Rate Survey is conducted by Rachelle Kakouris, who covers the distressed debt market for LCD.
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