The credit implosion

Defaults in 2002 have exceeded all expectations. Whether a corner has now been turned remains to be seen.

The news was supposed to be better at this point in 2002. At the end of 2001, all three rating agencies had predicted that this year would see a decline both in the number of companies defaulting and the default dollar volume. Instead, the first half of 2002 has left many investors’ portfolios pockmarked by imploding credit products.

In a September report, rating agency Moody’s Investors Service noted that in the first half of 2002, a global total of 86 speculative-grade corporate bond