Low default rates, a feeling of unease

Low default rates, a feeling of unease. There are plenty of reasons to worry about conditions in credit markets. One indicator, however, is still refusing to flash red, the percentage of companies defaulting. Global default rates for speculative companies remain below historical averages. The infrequency of corporate failures offers some reassurance that debt markets are not underpricing risks. The danger, however, is that defaults have simply been delayed: that the crises responses of central banks, by supporting companies with fragile balance sheets, have created a generation of zombie businesses that would normally have failed, and could yet. Jacques Cailloux, international economist at Nomura says easy money increases the sensitivity of companies to any change in interest rates - probably much more so than before. Some of the finance flowing into corporate bonds would not be there if borrowing costs were any higher. FT Subscribers can read the article here (VIEW LINK)