However, Moody's forecasts a rise in default rates this year, including an increase of the speculative-grade default rate to 3.1%. David Hamilton, Moody’s director of corporate debt research, said this was partly due to riskier debt issued in 2003-2004 reaching the age when default risk has historically been highest. The agency said average recovery rates, which peaked at 58.3% in 2006, were also likely to fall.
For 2006, Moody’s reported the automobile parts sector accounted for a third of the total volume of defaulted bonds. While 26 of the year’s 33 defaults occurred in the US, a larger proportion of non-US issuers also defaulted in 2006 than in 2005, including five in Europe.