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Moody’s Warns Default Wave Coming in 2016

Dec. 7, 2015 (EIRNS)—Moody’s Investors Service warned on Dec. 3 that the oil and gas and metals and mining sectors are facing a large spike in defaults early in 2016. It said that in the period since 2010, companies in those sectors had issued approximately $2 trillion in high-yield debt—meaning junk bonds and high-yield loans—which are now being further downgraded in large amounts and in which a default wave has started.

S&P Ratings Services had made an essentially identical warning one week earlier, on Nov. 25.

Moody’s managing director Daniel Gates was quoted in the Dec. 3 statement, that "Many [commodities] companies were temporarily cushioned by hedging programs and fixed-price contracts in the early stages of the downturn. Others have been sustained by cash balances that are eroding. Diminishing liquidity and restricted access to capital markets are now pushing more firms to default."

The Dec. 7, 2015 Wall Street Journal, in a front-page article "Junk Bonds Flash an Economic Warning," added that

"The declines are worrying Wall Street because junk-market declines have a record for foreshadowing economic downturns."