Moody's: Credit Crunch to Double Default Rate

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NEW YORK (HedgeWorld.com) - Liquidity stress is likely to cause junk-bond default rates to double to 4% over the next year. However, the current market disruption is not a repeat of the corporate credit quality crisis of the early 2000s and corporate investment- grade issuers will have the resources and the cash to withstand the crisis, Moody's Investors Service said in a report issued Tuesday [Sept. 11].

The report, "Market Turmoil Takes Uneven Toll," was written by Daniel Gates, Moody's chief credit officer for corporate debt. According to the report, the current credit crunch caused by U.S. subprime mortgage paper "has not significantly disrupted investment- grade issuance."

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Moody's: Credit Crunch to Double Default Rate

That's because the economy is on good footing, said Mr. Gates in an interview. At least, it is in much better shape now than it was earlier in the decade, when the United States experienced its last cred...

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