US credit risk default data needed for stress tests and scenarios, are likely to be repeated in the UK after a short lag of possibly only 6 months and in continental Europe 4 to 6 quarters thereafter.American Bankers Association (ABA)- first quarter of 2009:
- Home equity loan defaults increased from 3.03% in Q4 2008 to 3.52% Q1 2009.
- Home equity line of credit defaults rose from 1.46% to 1.89 %.
- Credit card defaults from 5.52 % to 6.6 % ("% of $ debt outstanding" basis).
- Direct auto loan delinquency from 2.03% to 3.01%.
- Personal loan defaults from 2.88% to 3.47%.
These are record highs based on the aggregate consumer credit delinquency index of the ABA since 1974!
CORPORATE credit quality?
- default rate on sub-investment grade bonds quadrupled to 9.5 % from 2.4 % over 4 quarters (Fitch Ratings).
- S&P expects to downgrade over $235bn of CMBS.
Loose underwriting, falling asset prices, falling rents and rising vacancies are hitting the commercial real estate sector.
Vice President Joe Biden says the administration "misread the economy." The projection that unemployment would peak at 8 % — has been exceeded 9.5 % ... and a double-digit level is imminent. EU countries have experienced rates as high as 20% in recent decades. It is reasonable to expect the US OFFICIAL rate to peak somewhere between 10 and 15%. The Obama are talking about the possibility of a second economic stimulus package. This would be incorporated in the budget for the year beginning 1st October. The $787bn FISCAL boost from the budget beginning in February has not fully fed through the economy but will require probably more than the same again.
