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Corporate Bonds: Expected Default and Loss Tables

On Friday, I wrote a post regarding the current bond yields in the market as of August 31, 2016, according to Moody’s. Top-rated corporate bonds (e.g., Aaa, Aa1), understandably, were yielding at around the Fed’s targeted rate of inflation, given the very low default rates. There is very little in terms of yield in real terms due to central bank quantitative easing policies bidding up asset prices worldwide.

Below are two tables showing Moody’s data on cumulative default probabilities and expected loss based on rating and time. These tables are based on 2003 data, but should hold relatively steady over time.

Moody’s Idealized Default Probability Table

Moody’s Idealized Expected Loss Table