Defaults in the U.S. are going to rise in 2016 and volatility in the credit markets could increase the likelihood of a recession, according to New York University Prof. Edward Altman, developer of the “Z-Score” method for predicting bankruptcies, Bloomberg News reported yesterday. “There is no question in my mind this year default rates will go beyond the average rates, maybe a lot more,” said Altman. The default rate on high-yield bonds was 2.8 percent in 2015, compared with a weighted average of 3.7 percent, according to Altman. “The high-yield markets have grown so big, you don’t need to have a large default rate to have tons of debt in trouble,” said Altman. At a 2.8 percent rate, as much as $45 billion of U.S. debt defaulted last year. This year, he expects chapter 11 filings to rise led by companies in energy, coal and metals and mining.
