http://www.reuters.com/article/reutersEdge/idUSN2828966520080729By Walden Siew and Dena Aubin - Analysis
NEW YORK (Reuters) - Corporate bond investors are bracing for growing defaults and record company bankruptcies starting in 2009 as the volume of distressed debt climbs past $184 billion, an all-time high.
More corporate debt is now trading at distressed levels than in 2002, when there was $165 billion of distressed corporate debt following the last bankruptcy boom, according to Moody's Investors Service data.
Nearly one in three junk bonds trade at levels known as "distressed," suggesting a serious risk of default. Even higher-rated corporate bonds have sunk to distressed levels in near-record volumes.
Automakers General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) and Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) lost their investment grade status in 2005 and their bonds have since plummeted to distressed credit levels.
Now bonds of financial firms such as CIT Group Inc (CIT.N: Quote, Profile, Research, Stock Buzz) National City Corp (NCC.N: Quote, Profile, Research, Stock Buzz) and bond insurers like MBIA Inc (MBI.N: Quote, Profile, Research, Stock Buzz) are trading as though investors expect them to follow that ignominious path.
"It's the fast deterioration of some of the higher-rated credits that is most alarming," said Jason Brady, a managing director at Thornburg Investment Management. "From a dollar standpoint, we're going to see a record wave of defaults and bankruptcies."
And yet interest rates still rather low compared to risk...hmmm...
