Looking ahead, a key question in credit markets is the likely timing of the turn of the current very benign credit cycle. The chart on the right in slide 5 shows that the decline in global corporate default rates stabilised at a low level in the first three quarters of 2005 after a very marked decline in 2002-2004.
Partially reflecting the effect of high oil prices, Moody’s rating agency currently forecasts that global default rates will pick up somewhat in early 2006, heralding less favourable credit conditions to come. It should, however, be noted that similar forecasts made at the beginning of 2005 proved to be inaccurate.