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Emerging Credit Risks in 2016

Credit risk has been top of mind for many of us over the past six to twelve months amidst changing rate policies from the Fed, slowing growth in China and plunging energy and commodity prices. If we look to the first quarter of 2016, you would be right to assume that Energy was still the riskiest sector globally.  However its riskiness is only marginally more than it was at the start of the year.  Instead, Information Technology experienced the most acceleration in risk on a relative basis. 

More telling is the story in Health Care which exhibited the second largest increase in risk, more than doubling in the first quarter, and it also increased the most on an absolute basis.  The one year forward looking probability of default from our PD Model Market Signals, which measures credit risk on a daily basis by taking its queues from the equity markets, sat at 0.663% on March 31, an increase from 0.324% on January 1. When we translate these PDs to implied credit scores based upon observed default history, we see that Health Care has declined to an implied credit score of ‘bb+’ from ‘bbb’, or a decline of two notches over just three months.

Median Probability of Default Trends for S&P Global BMI Sectors

This is just one facet of the global credit risk story, to hear more about these and other topics including:

  • Global economic conditions and risks to US growth
  • The Federal Reserve Bank's monetary policy in comparison to other central banks
  • Rated U.S. corporate issuer performance trends
  • Key credit themes in U.S. corporate ratings
  • Recent and emerging trends in global unrated credit  

Please join us on Tuesday, April 12th at 11AM EST where I will be joined by Standard & Poor's Ratings Services thought leaders Satyam Panday, an Economist in the Global Economics and Research team, and David Tesher, a Managing Director in the U.S. Corporate Ratings practice.

Register here.

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