Junk Default Forecasts Are Slashed as Worst Fears Go Unrealized

Rating companies have ripped up forecasts for double-digit defaults in U.S. credit markets as cheap funding and an accelerating economic recovery pull highly-indebted companies out of trouble. Investors say they’re being overly optimistic.

Fitch Ratings cut its forecast for this year’s junk defaults to just 2%, thanks to ample liquidity amid government stimulus, as well as rising oil prices and a lack of big debt payments coming due. The rate of missed debt payments could be as little as 1%, making it the lowest since 2013, Fitch’s Eric Rosenthal and Brendan Hoelmer wrote in a report Monday.

S&P Global Ratings ...