Probabilities of Default in the Corporate-Bond Market

Manuel Rueda

Corporate-bond prices contain information about market expectations on issuers' probabilities of default (PD). We used MSCI Credit Curves models to estimate the distribution of risk-neutral PDs by sector and analyzed their behavior over time. We observed how the COVID-19 crisis resulted in increased defaults, both physical and implied, particularly in the energy and consumer-discretionary sectors.

Source: MSCI Credit Curves (client access only).