Another follow-up question is: how does this default rate compare to the historical rate of default?
Hong Kong now has the highest default rate on outstanding credit-card debt in the world.
So we really are into triple digit interest rates just to cover the default rate alone.
Amazingly, despite their individual poverty the default rate as a group is very close to zero.
On the other hand, there remain troubled situations that could nudge the default rate higher.
Even the non-investment grade municipal paper averaged a 4.2% default rate for the past four decades.
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At present, most high-yield companies are covering their interest, as evidenced by the U.S. default rate.
To put that number in context, the median default rate during the 1990s was just 1%.
Let us assume the default rate in a mild recession would be somewhat lower, say 7%.
And in contrast to many unfinished developments in Dubai, the default rate among investors has been low.
In some cases, the interest rate can be higher than the default rate on other credit cards.
The consensus default rate estimates for 2012 and 2013, in fact, are inside the historical average of 3.4%.
The default rate is only 1.5%, a third the rate experienced by a typical U.S. credit card lender.
They did not have exposure to the incredibly high default rate and the sharp decrease in home values.
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Martin Fridson, of Fridson Investment Advisors, says that the default rate on high-yield bonds may climb to 10%.
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Hillsdale's default rate: about 1%, compared with a national average of about 10%.
On average, managers now estimate that the loan default rate by principal amount will end 2012 at 1.8%.
Its default rate hovers around 5%, on a par with banks, says Breslow.
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The default rate on corporate debt is still very low by historical standards.
Between 1970 and 2011, the average annual default rate was less than 0.1%.
Presumably, they would have the same lower default rate as other higher-rated companies.
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Last year Moody's issuer-weighted default rate was 11.11% on a 12-month trailing basis.
That still leaves it well ahead of the actual default rate so far.
The current student loan default rate is 8.8%, the highest on record.
The default rate for junk debt fell to an annualized 4.2% in April, from 5.5% at the end of 2003.
The default rate over the latest three months (non-annualized) is 0.37%, more than double what is was in December 2007.
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But Corso says the market is pricing in an implied cumulative default rate of 60% over the coming five years.
Furthermore, the market indicates that the default rate outlook is more bearish now than at the start of the last recession.
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This exposes the instability in the entire structure, because as soon as prices level off, the default rate starts to go up.
The default rate for individuals rose from 5.7% in January 2011 to 7.6% as of February 2012, according to the Central Bank.
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