S&P Industry Overview: A Long-Term Analysis of 19 U.S. Industry Sectors

Credit Trends:
Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

Global Fixed Income Research: Diane Vazza, Managing Director, New York (1) 212-438-2760; diane.vazza@standardandpoors.com Nick W Kraemer, Director, New York (1) 212-438-1698; nick.kraemer@standardandpoors.com
Table Of Contents
Introduction And Overview Default Rates Ratings Movements Ratings Performance Historical Bond Returns Appendix I: Monthly Issuer Counts By Industry, 1981-June 2013 Appendix II: One-Year Average Transition Matrices By Industry, 1981-2012 Appendix III: Corporate Average Cumulative Default Rates, 1981-2012 Appendix IV: Gini Methodology Related Research
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Credit Trends:
Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

In evaluating credit risk, many users of default studies and historical default and ratings transition data typically focus on long-term, aggregate average figures. It would be more instructive to consider the historical experiences of various industries and regions separately in order to get a better reflection of how various economic and industry cycles have affected specific segments at different points in time. In this report, we examine corporate bond issuer experiences across multiple industries within the U.S. (including Bermuda and the Cayman Islands). This highlights how different industries can experience varying levels of stress at different times. This report also shows how industries can vary significantly in terms of relative size and ratings mix, both currently and historically.
Introduction And Overview

This study follows the long-term experiences and defining characteristics of 19 different industries as classified by Standard & Poor's. These include: the aerospace and defense; automotive; banks and brokers; capital goods; chemicals, packaging, and environmental services; consumer products; financial institutions; forest products and building materials; health care; high technology; homebuilders/real estate cos.; insurance; media and entertainment; metals, mining, and steel; oil and gas; retail/restaurants; telecommunications; and utility sectors. This study only includes entities from the U.S. region (the U.S., Bermuda, and the Cayman Islands), from Jan. 1, 1981-June 30, 2013. The dataset used in the analyses of default rates, transition matrices, rating movements, and cumulative default rates is comprised of 9,030 issuers. Because of the large number of available industries, many exhibits will cover five broad categories of industry classification. The groupings are as follows: Financials and Utilities Banks and Brokers Financial Institutions Insurance Utility
Heavy Industries Aerospace and Defense Automotive Capital Goods Transportation
Advanced Industries Chemicals, Packaging, and Environmental Services Health Care
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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors High Technology Telecommunications Consumer-Reliant Sectors Consumer Products Homebuilders/Real Estate Co. Media and Entertainment Retail/Restaurants
Commodities/Raw Materials Forest Products and Building Materials Metals, Mining, and Steel Oil and Gas Over the 32.5 years covered in this study, the U.S. corporate bond market has undergone considerable changes. The most significant has been the periodic growth of speculative-grade ratings since the late 1980s. Typically, these periods of speculative-grade growth precede cyclical spikes in the U.S. speculative-grade default rate. Chart 1 shows the annual company counts by rating for issuers examined in this study. On the chart we can see four periods of growth in the speculative-grade ratings universe, with the first beginning in (approximately) 1986, the second in 1993, the third in 2005, and the last in 2011. In each case, these periods of growth were followed by a period of retraction that lasted roughly two years due to increased default activity and a slowdown in the pace of new ratings being assigned. Clearly, the most significant growth in the overall number of rated issuers occurred between 1993 and 2000, with the number of issuers with active ratings reaching an all-time high of 3,161 on Jan. 1, 2000. Alongside the trend of overall growth in the number of rated issuers, the composition of the U.S. corporate bond market has changed dramatically. On Jan. 1, 1981, only 19.1% of the issuers in this study possessed a speculative-grade rating, however, by Jan. 1, 2013, 53% of the issuers were rated as speculative grade--an increase of 179% and a solid majority of all rated issuers. By individual rating category, the number of 'B' rated firms increased by over 1,850% from 1981-2013, and it is now the largest rating category by number of issuers. Conversely, both the 'AAA' and 'AA' categories saw declines of roughly 95% and 33%, respectively. Clearly the credit profile of U.S. corporates issuers (including financial institutions and insurance companies) has become more risk-bearing over time, however, this is a general statement. Much of this report will focus on the differences in the way these industries have evolved over the last 32.5 years, and how their compositions have changed (for a graphical representation of the issuer-base growth of each industry, see appendix I). Many of the industries examined here are at different points in their life cycles, have different economic drivers, and have had unequal experiences during recessions and expansions. Given these considerations, the aim of this analysis is to emphasize a more detailed approach when examining and predicting default- and credit-risk.
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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors
Chart 1
Appendix I shows that, at any given time, some sectors have far more rated issuers than others. Also, the ratings distributions across various sectors are vastly different, and these distributions can also evolve over time within each individual sector. These combined qualities make for an evolving base from which standard, macro-level credit metrics are derived. For transition matrices, cumulative default rates, downgrade rates, and trailing-12-month default rates, for example, are all typically expressed as a percentage of an issuer base--whether geographically defined, at the industry level, or based on ratings and rating categories. Even when these 19 industries are combined into the five previously mentioned groupings, the ratings bases are still far from equally distributed (see chart 2). Throughout the 32.5 year history examined, the financials and utilities grouping has comprised the largest portion of rated issuers, though its lead has been slowly declining over time. On Jan. 1, 1993, financials and utilities comprised 41.2% of all rated issuers examined. By the start of 2013, this proportion had decreased to 33.1%. However, this decline is not the result of a shrinking issuer base for this grouping, but rather substantial growth in the other four industrial groupings. The main reason for the dominance of financials and utilities is its inclusion of both insurance companies and utilities, which respectively accounted for 13.3% and 9.8% of the overall issuer base at the start of 2013. These are, and have always been, the two largest sectors by issuer count. Between the start of 1993 and 2013, all five industrial groupings saw their issuer base increase, however, at very
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different rates of growth. Financials and utilities remains the largest grouping, but it has grown at a comparably slower rate of 25.7% since 1993. Only the heavy industries grouping grew at a slower pace (23.6%) over the same timeframe. The other three groupings--consumer-reliant sectors, advanced industries, and raw materials/commodities--saw enormous growth in their issuer bases over the last 20 years, rising by 92.5%, 89.7%, and 93.3%, respectively. While all five of these large industrial groupings saw increases, the consolidation masks the different experiences among individual constituent sectors. On one end, the industry that saw the largest growth in its issuer base since 1993 was the homebuilders/real estate co. segment, which saw an increase of 335.5%. On the other end, three sectors--financial institutions, telecommunications, and transportation--saw declines of 1.5%, 7.9%, and 24.7%, respectively.
Chart 2
Default Rates
Considering both the shifting dynamics of issuer bases over time, and past economic cycles that at times disproportionately affected certain sectors more than others, we will now examine the varying default experiences of each industry. In the following charts, default rates have been broken out by industry and are comprised of both investment-grade and speculative-grade companies.
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Financials and utilities have been combined into the same industry grouping because they have the highest proportions of investment-grade companies (see charts 18-21 in appendix I). As such, it should not be surprising that the default rates in these sectors are rather muted relative to all of the other sectors (see chart 3). For example, the maximum default rate these sectors experienced during the 32 years of our study was 7.1%, which was reached twice in the financial institutions sector during the 12 months ended Jan. 31, 2009, and Feb. 28, 2009. Meanwhile, the banks and brokers, insurance, and utility sectors' peak default rates were only 3%, 5.9%, and 2.2%, respectively. Every sector except for these four has experienced higher peak default rates during our observed period. These four sectors appear to have seen increased defaults during the three main U.S. recessions and related credit cycles of 1990-1991, 2000-2001, and the most recent downturn that began in late 2008. However, the intensity of default rates has varied, particularly during the last downturn, which effected financial institutions far more than it did the other three sectors. Despite the most recent recession of late 2008-early 2009 having been the most severe in terms of defaults for financial institutions, it was shorter-lived than the prolonged spike in defaults the sector experienced during the 1990-1991 cycle. In contrast, it would appear that the insurance sector was hit disproportionately hard in 1982 and 1983--a period of time when no official recession occurred. This sector experienced its highest historical default rate in the 12-months ended Oct. 31, 1983, with its previous high having come only 18 months earlier. However, this, as with all previous data points, comes from a very limited sample. These peak default rates for the insurance sector were the result of only one default in 1982 and two defaults in 1983. Since then, the sector has generally seen a gradual decline in its default rate, with only brief episodes of default generally coinciding with the three broad downturns previously mentioned. Broadly speaking, default rates prior to the late 1980s will appear more sporadic at the individual industry level, largely due to the much smaller sample sizes of rated issuers. At the beginning of the dataset (Jan. 1, 1981), only the consumer products and utility sectors had more than 100 rated issuers each, with many sectors having fewer than 40.
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Chart 3
As the insurance sector's experience illustrated, small sample sizes can produce inflated default rates. However, many sectors in the heavy industries grouping have exhibited the opposite--more subdued default rates with a smaller issuer base, and increasing default rates coinciding with increasing issuer bases (see chart 4). With the exception of the automotive industry, the industrial grouping's members generally saw their peak default rates during the 2000-2001 cycle. However, this is not to say that these sectors were not adversely affected during the most recent downturn. The automotive sector clearly experienced a particularly harsh default rate during the 12-months ended May 2009 through the 12-months ended May 2010. During this time, the sector saw a peak default rate of 30.9% in August 2009, which is the highest rate experienced by any sector. The second highest default rate came from the forest products and building materials sector, with an all-time high of 23.9%. Even given the exceptionally high default rate for the automotive sector during the most recent downturn, it's clear that it is no stranger to heightened stress, as its default rate hit at least four relative peaks between June 2000 and April 2007. In all four instances, the default rate hit or exceeded 7.9%. This is nearly identical to the experience of the closely related transportation sector, which also saw four spikes in its default rate over the same period--though on a slightly more subdued level. These four sectors are among the smallest of the 19 presented. In fact, of these four, only the capital goods sector has more than 100 rated issuers as of June 30, 2013. The aerospace and defense sector is the smallest of the group, both
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historically and currently, with less than 50 issuers rated as of June 30, 2013.
Chart 4
All of the sectors in the advanced industries grouping saw their peak default rates during the 2000-2001 U.S. recession (see chart 5). This is not particularly surprising as the telecommunications and high technology sectors are closely related, and that particular recession is often referred to as the bursting of the "dot com bubble." Nowhere can an industry-specific downturn be more clearly seen in the data than with the telecommunications sector. This sector experienced heady growth in its rated population--particularly in its speculative-grade segment--during the period leading up to June 2000. This coincides with the beginning of the sector's most severe default cycle, which hit an all-time high of 18.2% in the 12 months ended July 31, 2002. After telecom's peak default cycle ended, the sector's rated population returned to roughly the same level it was at prior to the buildup, although with a much larger proportion of companies with speculative-grade ratings as their numbers had been increasing relative to the total issuer base. Even now, the size of the sector's rated population has remained relatively stable over the last 10 years. During the most recent recession, all of the group's sectors saw some increases in their default rates, but for the most part the industrial grouping experienced a comparably mild rate of defaults relative to other sectors. The only sector that was particularly hard hit was the chemicals, packaging, and environmental services sector, which saw its default rate hit a recent high of 11.2% in the 12 months ended Sept. 30, 2009. This stands in sharp contrast with its three
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peers, which saw their default rates reaching highs of only 2% (for high technology and health care) and just over 4% (for telecommunications).
Chart 5
The consumer-reliant grouping has arguably experienced the most default stress of any of the groupings in our analysis. While the homebuilders/real estate co. sector has had probably the longest period of near zero to-non-existent default rates among all of the 19 sectors--seven and one-thirds years with only one default--its peers in the industrial grouping have had, conversely, some of the most consistently elevated default rates. This is especially true for the retail/restaurants and consumer products sectors. Of all of the sectors, the media and entertainment industry is the most vulnerable to continued defaults and further degradation of its credit quality. Approximately 89% of issuers in this sector with active ratings, as of July 1, 2013, are speculative-grade. This sector's trailing-12-month default rate ended June 30, 2013, is also the second-highest (after transportation), at 3.72%. These trends have largely been the result of underlying secular shifts over the past few decades, such as a decline in print media and radio caused by newer technologies. More recent additions in this industry such as online advertising have performed better. This sector grouping saw its most difficult default rate periods occur during the recessions of 1990-1991 and 2008-2009 (see chart 6). These recessions hit consumers harder than the "dot com" recession of 2000-2001, which seemed to take a harder toll on the stock market. In the case of the other two recessions, the unemployment rate
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remained higher than it did during the 2000-2001 downturn, cutting into the purchasing power of U.S. consumers and decreasing their spending.
Chart 6
Finally, the default experience of the industries in the raw materials/commodities group is more idiosyncratic than most (see chart 7). The forest products and building materials segment saw an extreme default rate associated with the most recent downturn, 23.9% in the 12 months ended Feb. 28, 2010. The financial crisis that began in late 2007 was related to historically over-inflated housing prices, which presaged one of the largest and most extended periods of falling home values and sales. This led to a severe drop in new housing construction and hit homebuilders particularly hard (see chart 6). Naturally, this also had a negative effect on building suppliers. In contrast, both the metals, mining, and steel and oil and gas sectors saw relatively modest default rates during the same period. The heavy industries grouping contains some of the smallest sectors, particularly forest products and building materials and metals, mining, and steel. Both sectors currently have fewer than 85 issuers each.
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Chart 7
Ratings Movements
While default rates tend to fluctuate nearly exclusively around economic downturns, ratings change fluctuations appear more frequently (see charts 8-12). Increases in the default rate give perhaps the best indication of stressful credit conditions for corporate borrowers, however, they also have a lower bound of zero. Looking at the net change in ratings actions can give additional insight into periods of more favorable credit conditions by reflecting both downgrades and upgrades. In charts 8-12 we show the net upgrade ratio (which could also be considered the inverse of the net downgrade ratio) on a trailing-12-month basis. This is defined as the number of upgrades in a particular period less the number of downgrades, with the result expressed as a percentage of the issuer base. As a general rule, periods of heightened downgrades tend to both outnumber upgrades over the long-term, and are generally more severe. This is clearly visible in the proportion of data points below zero (a higher number of downgrades versus upgrades will result in a negative reading). However, the tendency seems to be that the more severe the downturn is, the quicker the upswing will be and the greater its magnitude. For example, the downturns that coincided with the 1990-1991, and 2008-2009 recessions produced marked declines in credit quality for financials and utilities, but these were followed by periods of net upgrades (see chart 8). From here, we can also observe that the

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banks and brokers grouping follows a generally coincident ratings action path as financial institutions. For these two industries, as well as insurance companies, the most recent downturn produced a significant amount of downgrades. While the pace of downgrades in these sectors has subsided, the typical rebound we have seen in the past has not yet materialized. This is likely a consequence of the downgrade of the U.S. on Aug. 11, 2011, which effectively puts a "cap" on how high most insurance companies and financial institutions (particularly banks) can be rated. The ratings criteria for many firms in these sectors base issuer ratings on implicit support from the U.S. for financial institutions, and on large holdings of U.S. Treasuries for insurance companies.
Chart 8
Fluctuations in net rating changes have been particularly volatile among segments in the heavy industries grouping, with the automotive sector being the most volatile (see chart 9). Just as this sector produced the highest default rates during the most recent downturn, it also produced the most severe net downgrade rate among all of the sectors, reaching a low of -56.9% in the 12 months ended March 31, 2009. As is often the case, this sector then experienced a positive reversal of nearly the same magnitude over a three-year span, reaching a net upgrade rate of 51.06% in the 12 months ended May 31, 2011. This is the highest net upgrade rate seen among all of the sectors. Many firms within the sector are auto parts and components suppliers, which were hit particularly hard by the bankruptcies and financial troubles of the three largest U.S. car manufacturers. After the government provided financial relief to the automakers,

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their operations resumed, providing the necessary business for a period of sustained upgrades in the sector. Currently, these sectors are trending in the direction of net downgrades amid a wobbly recovery. As of the 12-month period ended June 30, 2013, the aerospace and defense sector had experienced the highest proportion of net downgrades at -15%.
Chart 9
Despite the downturn of 2000-2001, which hit segments in the advanced industries grouping particularly hard, these sectors have otherwise had a much more positive experience than the other industries in terms of net upgrades, especially the health care sector (see chart 10). While all of the other industries have a long-term average net upgrade ratio that is negative, averaging -3.66% across industries, this sector is the only one with a long-term average in positive territory (1.2%). This sector also tends to follow a different path of net rating changes relative to its peers, experiencing peaks and troths at different and sometimes contradictory times as the other three. For example, during the period spanning roughly the 12 months ended Sept. 30, 2000, through the 12 months ended April 30, 2005, the health care and chemicals, packaging, and environmental services sectors followed nearly the exact opposite pattern in net rating movements. Overall, the advanced industries grouping has experienced less ratings change volatility over the long-term, relative to

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the other four industrial groups. This is of course relative, since it can be seen that rarely do any industries see periods of little or no rating changes. Still, these four sectors generally display fewer large fluctuations as a whole.
Chart 10
The most recent economic downturn produced the highest net downgrade rates for all of the industries in the consumer-reliant sector grouping, with the homebuilders/real estate co. and media and entertainment industries seeing the largest declines (see chart 11). This is consistent with the elevated default rates experienced by these two sectors during this period. Putting the rate of defaults and proportion of downgrades together, the most recent recession proved to be incredibly harsh for these two sectors from a credit perspective. Charts in appendix I provide context for the ratings-based statistics. Different industries have grown and/or matured (in terms of rated issuer counts) at different rates. Chart 11 provides a clear example of the results of figures based off of a very small sample of the homebuilders/real estate co. sector. At the beginning of the database on Jan. 1, 1981, the homebuilders/real estate co. sector had an extremely small number of issuers--less than 10. This was true until 1984, and it wasn't until 1987 that the sector had at least 30 issuer. The net upgrade ratio for the sector appears very stilted until around early 1986.

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Chart 11
With the exception of the downgrade experiences within the forest products and building materials sector due to the most recent recession, industries in the raw materials/commodities sector grouping have generally seen a more stable pace of ratings changes over time (see chart 12). Unlike most other sectors, the metals, mining, and steel and oil and gas sectors experienced their most severe periods of net downgrades during the mid-1980s. These sectors have also tended to experience periods of net downgrades during the three U.S. recessions, though they are not quite as severe as in other sectors. Given the extent of losses in the U.S. real estate market, in terms of falling home prices and slowing housing starts, the firms that provide materials to the homebuilders have also suffered in kind. Net downgrade rates reflect aggregate level forces that can affect particular industries at different times. The overall economy would clearly be the highest-level driver of upgrades and downgrades, while market forces, which may produce cycles within a specific industry, also come into play--such as an extended low interest rate environment that would encourage more consumers to buy a house or take on more discretionary debt. However, at any given point in time, it is generally the case that lower-rated entities are more likely to either default or be downgraded. The exhibits thus far only show high-level amalgams of data for defaults and ratings actions within an industry as a whole. For a more granular breakdown of both defaults and ratings actions by rating, please see appendix II for one-year average transition matrices by industry.

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Chart 12
Ratings Performance
All of our default studies include metrics for assessing ratings performance over the long-run. Ratings performance measures are typically grounded in three concepts: default, prior ratings, and time to default. By this we mean that, for the samples examined, the key considerations are the defaulter's rating, and the time frame over which their credit deterioration took place. We can see that the median original rating of defaulting corporate issuers in this study is 'B+' (see table 1). This is generally the case with all industrial groups outside of financials and utilities. In their case, the median original ratings of their defaulters are slightly-to-considerably higher, ranging from 'BB'-'BBB+'. Like the underlying ratings distribution of all issuers in these industries, the defaulters originating from these four sectors also tend to come from a higher proportion of investment-grade ratings. In fact, among defaulters in the insurance sector, nearly 72% possessed an initial investment-grade rating. At the other end of the spectrum, defaulters from the advanced industries grouping began their rating histories very heavily skewed towards speculative-grade ratings, with only 1.7% of defaulters within the telecommunications sector possessing an investment-grade initial rating. While financials and utilities may have produced defaulters with higher initial ratings on average, they also produced fewer defaults--both in absolute number and as a percentage. Overall, financials and utilities combined for 190

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defaulters as of June 30, compared to 272 defaulters for heavy industries, 326 for advanced industries, 625 for consumer-reliant sectors, and 252 for raw materials/commodities. The financials and utilities grouping also saw longer average and median times to default than other sectors, with a weighted average of 7.64 years compared with an overall weighted average of 6.35 years for all 1,665 defaulters in the 32.5 years covered.
Table 1
Time To Default From Original Rating

Median original rating of Defaults defaulters Average years from original rating Median years from original rating Standard deviation of years from original rating Percentage beginning with investment-grade ratings
Industry Financials and utilities Banks and brokers Financial institutions Insurance Utility Weighted average Heavy industries Aerospace and defense Automotive Capital goods Transportation Weighted average Advanced industries Chemicals, packaging, and environmental services Health care High technology Telecommunications Weighted average Consumer-reliant sectors Consumer products Homebuilders/real estate companies Media and entertainment Retail/restaurants Weighted average
Range
21 BBB71 BB 53 BBB+ 45 BB
7.51 7.44 7.54 8.14 0.00
5.53 4.35 6.58 4.33 0.00
6.15 7.27 5.14 7.58 0.00
22.44 28.59 19.84 24.19
52.38 30.99 71.70 46.67 0.00
25 B+ 67 B+ 88 B+ 92 B+
5.14 7.52 6.54 6.87 0.00
3.82 5.25 4.97 3.88 0.00
3.56 7.02 4.95 6.95 0.00
15.27 27.99 23.35 30.87
4.00 13.43 10.23 14.13 0.00
82 B+
6.40
5.12
5.02
27.33
9.76
58 B+ 66 B+ 120 B
5.14 5.92 4.49 0.00
3.37 3.99 3.53 0.00
4.09 5.86 3.51 0.00
17.00 28.45 21.37
3.45 9.09 1.67 0.00
169 B+ 41 B+ 245 B+ 170 B+
6.53 6.46 5.71 7.10 0.00
4.82 3.57 3.97 5.57 0.00
5.56 6.95 4.89 5.38 0.00
28.23 28.78 27.92 25.91
9.47 17.07 5.71 15.29 0.00
Raw materials/commodities Forest products and building materials Metals, mining, and steel Oil and gas Weighted average 86 B+ 70 B+ 96 B 7.88 6.96 4.04 0.00 6.05 5.43 3.00 0.00 5.72 5.50 3.72 0.00 27.38 21.11 22.67 15.12 14.29 10.42 0.00

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Table 1
Time To Default From Original Rating (cont.)

Total Weighted average 1,665 B+ 6.35 6.35 4.51 4.55 5.54 5.36 30.87 14.29 14.29
Source: Standard & Poor's Global Fixed Income Research and Standard & Poor's CreditPro.
Another metric available for assessing ratings performance is the Gini coefficient. This is a measure of the rank-ordered power of the ratings system over a given time horizon. It shows the ratio of actual rank-ordering performance to theoretically perfect rank ordering. This involves plotting the cumulative share of defaulters against the cumulative share of issuers by rating in a Lorenz curve to visually render the accuracy of its rank ordering (see appendix IV for definition and methodology). The one-, three-, and five-year weighted Gini coefficients for the 19 industries presented are displayed in table 2. As expected, the Gini coefficients decline over time because longer time horizons allow greater opportunity for credit degradation among higher-rated entities. If the rank-ordering of ratings had little predictive value, the cumulative share of defaulting corporate entities and the cumulative share of all entities at each rating would be nearly the same, producing a Gini ratio of zero. Gini coefficients do, however, show a range of possibilities between industries, with the homebuilders/real estate co. sector producing a one-year Gini coefficient of 92.22, while the automotive sector's one-year Gini coefficient is 68.12. Overall, the average one-year Gini coefficient (with equal weighting across industries) is 76.75, with an associated standard deviation of 6.12. After five years, the average and standard deviation are 62.6 and 9.06.
Table 2
Weighted Average Gini Coefficients By Sector

One-year Financials and utilities Banks/brokers Financial institutions Insurance Utility Heavy industries Aerospace and defense Auto Capital goods Transportation Advanced industries Chemical, packaging, and enviromental services Health care High tech Telecoms Consumer-reliant sectors Consumer 77.81 71.86 67.65 75.66 69.95 70.10 82.82 66.68 58.02 58.02 77.79 61.46 53.97 54.36 76.33 79.48 68.12 82.63 83.10 68.74 62.99 73.56 78.71 62.44 57.64 72.10 76.80 77.38 76.50 76.76 76.31 59.48 69.13 61.83 68.78 44.32 66.31 53.12 62.30 Three-year Five-year

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Table 2
Weighted Average Gini Coefficients By Sector (cont.)

Homebuilders/real estate Media and entertainment Retail/restaurants Raw materials/commodities Forest products and building materials Metals, mining, and steel Oil and gas 74.99 69.12 82.08 68.06 59.23 75.73 62.91 56.78 71.01 92.22 70.04 73.14 82.62 59.19 65.45 74.82 52.01 62.94
Source: Standard & Poor's Global Fixed Income Research and Standard & Poor's CreditPro.
Finally, another measure of ratings performance used in our default studies is cumulative default rates. Appendix III lists cumulative default rates for all 19 sectors, and they are broadly consistent with the findings in our default studies: the higher the rating, the lower the observed frequency of default, and vice versa. Exceptions to the rule exist, but they are few in number and are not surprising considering the more granular level of industrial breakouts presented here.
Historical Bond Returns

After examining all the historical stress periods and relative risks of these sectors, it is useful to put these measures against the upside of bond returns. Here we provide quarterly total returns for each industry using the larger sector groupings (see charts 13-17). Broadly, bond returns clearly follow a more correlated path than other metrics do, such as default rates and net rating changes. One important distinction is that our proprietary bond returns series begin on Jan. 1, 2003, so our analysis will cover a shorter time frame than prior exhibits. Overall, most sectors have a rather healthy pace of returns from first quarter 2003 to fourth quarter 2007, on average. Most industries saw fluctuations with an upper bound of 5% and a lower bound of roughly 2%-3%. These troughs were generally in second quarter 2004, the first and third quarters of 2005, and the first and second quarters of 2006. However, the following seven quarters were much more volatile. At the end of first quarter 2008, only the media and entertainment sector saw a marked level of stress--hitting a record quarterly loss of -4.7%. However, the losses gained momentum from there, and by fourth quarter 2008 they were hitting previously unseen levels, averaging -7.8%. The worst hit was the automotive sector, which saw a loss of -29.8% in fourth quarter 2008. Other sectors that were particularly hard hit this quarter were the media and entertainment industry, which saw a loss of -20.6%, forest products and building materials, which fell -17.8%, and metals, mining, and steel, which lost 17.2% for the quarter. With the support of the Federal Reserve returning confidence to investors, most sectors saw bond returns of nearly the same magnitude in the positive direction within a quarter or two. The outlier in second quarter 2009 was the automotive sector--returning 41.4%--followed by the media and entertainment sector, which returned 26.3%. After this period that could otherwise be described as chaotic, bond returns across most sectors returned to the same general movements (and magnitude) that they had been experiencing prior to the financial crisis.

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Chart 13

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Chart 14

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Chart 15

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Chart 16

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Chart 17
Because our bond series contain actively rated bonds (and exclude defaulted instruments), the downturn that began in late 2008 had a marked effect on their composition (see table 3). For example, as the most recent downturn had a disproportionately hard impact on financial institutions, the issue-base for this sector decreased by over 70% from Sept. 30, 2008-Aug. 20, 2013. Among financials, the insurance sector also experienced a similar decline, with a 50.5% decline in the number of included issues over the same time frame. These are some of the most represented industries in our bond series. When combined with the rest of the financials and utilities grouping, they make up 41.9% of the total, though that is still down markedly from 58.3% in September 2008. At the other end of the spectrum, more modestly sized industries such as high technology and health care saw substantial increases in their issuer bases, rising 136.8% and 77.2%, respectively. In fact, 17 of the 19 sectors saw either increases or decreases of a magnitude greater than 10% over this time frame, with an average absolute change of 39.9%. Also included in table 3 is the Herfindahl Index measure (H-index) for each sector, both at the end of third quarter 2008, and as of Aug. 20, 2013. This provides a gauge for how concentrated each sector is in relation to its number of issuers when measured by each issuer's issuer-base. Some sectors may have many more issues outstanding than others, but many of those outstanding issues could be from the same issuer or a small group of issuers. The more concentrated a particular sector is, the more its various bond metrics (including returns) will be influenced by the

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performance of its largest members. The H-index values are calculated as the sum of each sector's constituent issuers' squared proportion of included bonds. For analytical purposes, the higher the H-index value the more concentrated the sector is--the more its bonds are concentrated among a smaller number of issuers. The furthest right column shows the absolute change in each sector's H-index value between Sept. 30, 2008-Aug. 20, 2013. While this measure appears to be only slightly unchanged for most sectors over the nearly five-year time frame, the transportation and insurance sectors are now much less concentrated than they were previously. The most striking change is that at the start of the financial crisis near the end of 2008, the relationship between a sector's issue size and its level of concentration was positive--with a correlation of 0.41. Currently, this relationship is much less robust, with a correlation of only 0.09. With the exception of the high technology and transportation sectors, much of the changing dynamics in the bond market between late 2008 and today lie squarely on financials (financial institutions and insurance). These sectors have historically been the largest when measured by issue size. However, they have seen substantial declines over the last five years, both in terms of outstanding issues and in new issuance trends. This is likely the result of experiencing both a period of elevated stress--as is the case with banks and financial institutions in the most recent crisis--and having to navigate through a new regulatory regime over the past five years that has focused much of its attention on reducing leverage among large financial institutions.
Table 3
Changing Composition Of Bond Indices

As of Sept. 30, 2008, and Aug. 20, 2013 --9/30/2008-No. of bonds 576 2606 1274 1144 109 101 153 634 206 246 171 329 383 295 411 296 165 81 420 --8/20/2013-No. of bonds 619 770 631 1438 137 112 206 232 281 436 405 377 547 340 503 337 159 135 586 Bond no. change (%) 7.47 (70.45) (50.47) 25.70 25.69 10.89 34.64 (63.41) 36.41 77.24 136.84 14.59 42.82 15.25 22.38 13.85 (3.64) 66.67 39.52 H-index change (0.68) (4.26) (32.32) (0.19) (0.19) (1.20) 0.33 (39.02) (0.38) (1.12) (1.79) (7.09) 4.33 (0.35) 0.35 (0.90) (0.64) (3.24) (1.00)
Subsector Banks and brokers Financial institutions Insurance Utility Aerospace and defense Auto Capital goods Transportation Chemical, packaging, and enviromental services Health care High tech Telecom Consumer Homebuilders/real estate Media and entertainment Retail/restaurant Forest products and building materials Metals, mining, and steel Oil and gas
H-index 8.90 16.35 47.06 1.89 6.88 7.56 3.32 45.81 2.97 3.05 3.82 9.15 2.45 2.69 2.07 4.14 4.82 6.54 2.51
H-index 8.22 12.09 14.74 1.70 6.69 6.36 3.65 6.79 2.59 1.93 2.03 2.06 6.78 2.34 2.42 3.23 4.18 3.30 1.51

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Table 3
Changing Composition Of Bond Indices (cont.)

H-index--Herfindahl Index. Herfindahl index shares equal each issuers share based on issue count. Source: Standard & Poors Global Fixed Income Research and Standard & Poors CreditPro.
Appendix I: Monthly Issuer Counts By Industry, 1981-June 2013

Chart 18

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Chart 36
Appendix II: One-Year Average Transition Matrices By Industry, 1981-2012

Table 4
Financials And Utilities

--(%)-Banks and brokers From/to AAA AA A BBB BB B CCC/C AAA 81.73 0.00 0.05 0.00 0.00 0.00 0.00 AA 14.42 84.27 2.00 0.34 0.46 0.00 0.00 A 1.92 11.52 89.01 4.37 0.93 0.81 0.00 BBB 0.00 0.56 3.55 84.92 8.80 0.81 0.00 BB 0.00 0.00 0.35 3.00 64.81 5.65 3.85 B 0.00 0.00 0.10 0.69 9.26 67.74 15.38 CCC/C 0.00 0.00 0.00 0.09 1.39 7.26 42.31 D 0.00 0.14 0.05 0.17 0.93 5.65 19.23 NR 1.92 3.51 4.90 6.43 13.43 12.10 19.23
Financial institutions AAA 91.76 3.00 1.12 0.37 0.37 0.00 0.37 0.00 3.00

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Table 4
Financials And Utilities (cont.)

AA A BBB BB B CCC/C Insurance AAA AA A BBB BB B CCC/C Utilities AAA AA A BBB BB B CCC/C 70.97 0.09 0.00 0.00 0.32 0.00 0.00 9.68 87.79 1.40 0.00 0.00 0.00 0.00 0.00 9.07 88.85 3.58 0.47 0.96 4.88 0.00 0.65 6.11 89.43 14.72 1.28 0.00 0.00 0.09 0.44 2.54 69.94 11.50 2.44 0.00 0.00 0.00 0.45 6.49 69.65 12.20 0.00 0.00 0.09 0.03 0.32 3.83 48.78 0.00 0.00 0.06 0.23 0.63 4.47 21.95 19.35 2.31 3.06 3.75 7.12 8.31 9.76 87.85 0.83 0.03 0.00 0.00 0.00 0.00 10.22 86.99 2.73 0.29 0.21 0.39 0.00 0.11 7.86 88.23 5.13 0.85 0.77 0.00 0.00 0.33 3.63 82.44 9.11 0.39 0.00 0.11 0.04 0.36 3.61 72.46 9.27 1.92 0.11 0.08 0.09 0.65 4.66 72.20 11.54 0.00 0.08 0.00 0.51 1.69 4.63 42.31 0.00 0.08 0.18 0.36 1.27 2.32 30.77 1.59 3.70 4.76 7.01 9.75 10.04 13.46 0.45 0.07 0.00 0.00 0.00 0.00 85.45 2.54 0.66 0.40 0.00 0.00 8.64 85.29 3.60 0.00 0.00 0.00 0.61 5.07 82.29 6.80 0.52 0.00 0.15 0.51 3.79 71.00 6.99 2.33 0.00 0.14 1.14 9.20 69.95 10.47 0.00 0.14 0.19 1.60 7.51 43.02 0.00 0.22 0.95 1.60 6.22 25.58 4.70 6.01 7.39 9.40 8.81 18.60
NR-Not rated. Source: Standard & Poors Global Fixed Income Research and Standard & Poors CreditPro.
Table 5
Heavy Industries
--(%)-Aerospace and defense From/to AAA AA A BBB BB B CCC/C Automotive AAA AA A BBB 0.00 0.00 0.00 0.00 100.00 85.94 1.60 0.00 0.00 12.50 83.96 4.37 0.00 0.00 9.09 80.56 0.00 0.00 0.00 9.52 0.00 0.00 0.00 1.98 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.56 5.35 3.57 AAA 0.00 0.00 0.43 0.00 0.00 0.00 0.00 AA 0.00 88.10 0.43 0.37 0.00 0.00 0.00 A 0.00 7.14 88.31 3.70 0.30 0.00 0.00 BBB 0.00 0.00 5.19 82.96 5.06 0.30 5.00 BB 0.00 1.19 0.43 4.44 82.44 5.62 0.00 B 0.00 0.00 0.87 0.74 4.17 76.33 10.00 CCC/C 0.00 0.00 0.00 0.37 0.00 3.25 30.00 D 0.00 0.00 0.00 0.00 0.60 2.96 50.00 NR 100.00 3.57 4.33 7.41 7.44 11.54 5.00

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Table 5
Heavy Industries (cont.)

BB B CCC/C Capital goods AAA AA A BBB BB B CCC/C Transportation AAA AA A BBB BB B CCC/C 90.16 0.00 0.00 0.11 0.00 0.00 0.00 1.64 84.87 2.23 0.11 0.21 0.19 0.00 0.82 5.17 84.04 2.37 0.42 0.19 1.19 0.00 3.32 9.09 86.01 5.41 0.75 0.00 0.00 0.74 1.30 3.66 72.35 6.23 0.00 0.00 0.00 0.37 0.65 8.73 73.02 13.10 0.00 0.00 0.00 0.32 1.66 4.91 44.05 0.00 0.00 0.00 0.22 1.25 7.92 32.14 7.38 5.90 2.97 6.57 9.98 6.79 9.52 91.67 0.00 0.00 0.00 0.00 0.00 0.00 4.17 92.11 0.13 0.00 0.00 0.00 0.00 0.00 7.24 90.84 4.01 0.00 0.34 0.00 0.00 0.66 4.96 81.61 5.41 0.00 0.00 0.00 0.00 0.00 5.69 78.07 4.30 0.00 0.00 0.00 0.51 0.67 6.58 76.36 12.79 0.00 0.00 0.00 0.17 0.29 4.19 48.84 0.00 0.00 0.00 0.33 0.73 4.19 29.07 4.17 0.00 3.56 7.53 8.92 10.63 9.30 0.00 0.00 0.00 0.00 0.22 0.00 0.26 0.00 0.00 4.50 0.44 0.00 74.87 9.45 0.00 12.96 69.23 25.00 0.53 5.71 41.67 1.59 7.69 23.33 5.29 7.25 10.00
NR-Not rated. Source: Standard & Poors Global Fixed Income Research and Standard & Poors CreditPro.
Table 6
Advanced Industries
--(%)-Chemicals, packaging, and environmental services From/to AAA AA A BBB BB B CCC/C Health care AAA AA A BBB BB B CCC/C 92.74 1.60 0.00 0.00 0.00 0.00 0.00 5.65 90.37 1.55 0.00 0.00 0.00 0.00 0.81 5.35 87.37 6.09 0.32 0.09 0.00 0.00 0.53 5.93 81.03 5.74 0.18 0.00 0.00 0.00 0.26 5.62 76.08 3.86 1.27 0.00 0.00 0.00 1.17 5.90 78.35 11.39 0.00 0.00 0.00 0.00 0.80 2.43 51.90 0.00 0.00 0.00 0.00 0.48 2.34 17.72 0.81 2.14 4.90 6.09 10.69 12.76 17.72 AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 100.00 80.00 1.10 0.00 0.13 0.00 0.00 A 0.00 16.92 89.83 1.96 0.00 0.00 0.00 BBB 0.00 0.00 4.85 88.82 3.10 0.11 0.00 BB 0.00 0.00 0.78 4.53 79.92 5.19 0.00 B 0.00 0.00 0.31 0.60 8.36 78.13 22.00 CCC/C 0.00 0.00 0.00 0.00 0.27 3.16 30.00 D 0.00 0.00 0.00 0.15 1.21 4.51 44.00 NR 0.00 3.08 3.13 3.93 7.01 8.91 4.00

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Table 6
Advanced Industries (cont.)

High technology AAA AA A BBB BB B CCC/C 91.23 1.82 0.00 0.00 0.00 0.00 0.00 7.02 86.67 1.44 0.22 0.00 0.08 0.00 1.75 7.27 88.04 4.16 0.37 0.00 0.00 0.00 0.00 6.70 80.96 4.09 0.08 0.00 0.00 0.00 0.48 6.56 75.31 5.41 1.79 0.00 0.00 0.24 2.84 8.06 75.32 12.50 0.00 0.00 0.00 0.22 0.62 1.98 39.29 0.00 0.00 0.00 0.44 0.25 2.67 21.43 0.00 4.24 3.11 4.60 11.29 14.47 25.00
Telecommunications AAA AA A BBB BB B CCC/C 85.31 1.20 0.00 0.00 0.00 0.00 0.00 12.43 86.60 3.94 0.53 0.00 0.10 0.00 0.00 6.01 84.53 6.90 0.21 0.21 0.00 0.00 0.86 4.67 79.84 2.76 0.52 0.66 0.00 0.00 0.44 2.92 79.41 4.56 0.00 0.00 0.17 0.58 0.53 6.16 72.72 10.53 0.00 0.00 0.00 0.00 1.06 6.85 38.16 0.00 0.00 0.00 0.80 0.64 3.53 34.87 2.26 5.15 5.84 8.49 9.77 11.51 15.79
NR-Not rated. Source: Standard & Poors Global Fixed Income Research, and Standard & Poors CreditPro.
Table 7
Consumer-Reliant Sectors
--(%)-Consumer products From/to AAA AA A BBB BB B CCC/C AAA 77.97 0.22 0.00 0.00 0.10 0.00 0.00 AA 18.64 87.42 1.69 0.10 0.00 0.06 0.00 A 0.00 8.03 88.50 3.02 0.10 0.06 0.00 BBB 0.00 0.65 4.72 85.87 4.05 0.28 0.00 BB 0.00 0.00 0.71 5.07 75.99 3.51 1.04 B 0.00 0.00 0.18 0.68 9.09 77.05 10.36 CCC/C 0.00 0.00 0.00 0.00 0.59 4.48 52.33 D 0.00 0.00 0.00 0.00 1.28 4.31 23.83 NR 3.39 3.69 4.19 5.26 8.79 10.25 12.44
Homebuilders/real estate AAA AA A BBB BB B CCC/C 92.31 0.69 0.00 0.00 0.00 0.00 0.00 3.85 90.97 0.00 0.00 0.00 0.00 0.00 0.00 3.47 87.15 1.26 0.00 0.00 0.00 0.00 2.08 8.38 90.89 4.63 0.00 0.00 0.00 0.00 0.00 3.12 81.48 6.15 0.00 0.00 0.00 1.12 0.17 7.87 76.15 14.29 0.00 0.69 0.00 0.17 1.16 6.15 30.95 0.00 0.00 0.00 0.00 0.69 6.15 40.48 3.85 2.08 3.35 4.38 4.17 5.38 14.29
Media and entertainment AAA AA 63.64 0.00 9.09 85.50 18.18 10.69 0.00 0.76 0.00 0.00 0.00 0.76 0.00 0.00 0.00 0.00 9.09 2.29

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Table 7
Consumer-Reliant Sectors (cont.)

A BBB BB B CCC/C 0.24 0.15 0.00 0.00 0.00 1.70 0.00 0.00 0.00 0.00 82.28 2.91 0.15 0.14 0.00 9.22 82.39 2.85 0.05 0.29 0.49 7.28 77.32 4.04 0.87 0.00 0.58 8.71 74.58 10.20 0.00 0.00 0.59 6.27 49.27 0.00 0.15 1.02 4.23 26.82 6.07 6.55 9.36 10.69 12.54
Retail/restaurants AAA AA A BBB BB B CCC/C 75.00 0.00 0.15 0.00 0.00 0.00 0.00 12.50 88.59 1.38 0.00 0.00 0.07 0.00 6.25 7.07 86.81 4.52 0.00 0.00 0.00 0.00 0.00 8.13 80.69 3.53 0.07 0.78 0.00 0.00 0.00 7.01 76.16 4.70 0.00 0.00 2.17 0.61 1.09 11.07 75.69 11.63 0.00 0.00 0.00 0.00 0.12 4.92 40.31 0.00 0.00 0.00 0.31 0.97 4.85 37.98 6.25 2.17 2.91 6.39 8.15 9.69 9.30
Table 8
Raw Materials/Commodities
--(%)-Forest products and building materials From/to AAA AA A BBB BB B CCC/C AAA 50.00 0.00 0.21 0.00 0.00 0.00 0.00 AA 0.00 77.55 0.42 0.00 0.00 0.00 0.00 A 0.00 22.45 87.18 2.72 0.19 0.00 0.00 BBB 0.00 0.00 7.98 85.87 4.73 0.28 0.00 BB 50.00 0.00 1.05 4.71 79.21 2.70 0.00 B 0.00 0.00 0.00 0.36 6.99 77.59 14.67 CCC/C 0.00 0.00 0.00 0.18 0.19 5.11 42.67 D 0.00 0.00 0.42 0.54 0.76 5.11 33.33 NR 0.00 0.00 2.73 5.62 7.94 9.22 9.33
Metals, mining, and steel AAA AA A BBB BB B CCC/C Oil and gas AAA AA A BBB BB 86.23 0.71 0.24 0.00 0.00 9.42 87.44 0.95 0.26 0.00 0.72 4.74 85.70 3.51 0.00 0.00 0.71 8.75 87.43 4.33 0.00 0.00 0.24 3.25 79.76 0.00 0.47 0.24 0.17 7.58 0.00 0.00 0.12 0.17 0.54 0.00 0.00 0.12 0.09 0.54 3.62 5.92 3.66 5.13 7.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 87.10 0.67 0.00 0.00 0.00 0.00 0.00 9.68 80.54 1.11 0.00 0.00 0.00 0.00 3.23 14.77 85.60 5.11 0.16 0.00 0.00 0.00 0.67 8.59 78.51 4.07 2.99 0.00 0.00 0.00 0.55 9.36 75.61 20.90 0.00 0.00 0.00 0.00 0.43 5.53 37.31 0.00 0.00 0.00 0.28 1.28 5.20 28.36 0.00 0.00 3.36 3.88 5.32 9.43 10.45

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Table 8
Raw Materials/Commodities (cont.)

B CCC/C 0.00 0.00 0.00 0.00 0.25 0.74 0.25 1.47 7.11 0.00 74.51 11.03 4.66 50.00 6.00 17.65 7.23 19.12
Appendix III: Corporate Average Cumulative Default Rates, 1981-2012

Table 9
Financials And Utilities

Bank and brokers --Time horizon-(%) AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated Y1 0.00 0.14 0.05 0.17 0.93 Y2 0.00 0.28 0.15 0.53 2.38 Y3 0.00 0.58 0.37 1.01 2.38 Y4 0.00 0.88 0.59 1.42 3.52 Y5 0.00 1.35 0.82 1.52 4.12 Y6 0.00 1.84 1.05 1.64 4.76 Y7 0.00 2.19 1.30 1.88 5.46 Y8 0.00 2.54 1.56 2.01 6.18 Y9 0.00 2.54 1.82 2.15 6.18 Y10 0.00 2.73 2.04 2.30 6.18 Y11 0.00 2.73 2.19 2.63 6.18 Y12 0.00 2.73 2.34 2.81 6.18 Y13 0.00 2.73 2.51 2.81 6.18 Y14 0.00 2.73 2.68 2.81 6.18 Y15 0.00 2.73 2.87 2.81 6.18
5.65 11.88 16.72 19.96 22.39 23.80 23.80 23.80 23.80 23.80 23.80 23.80 23.80 23.80 23.80 19.23 23.27 23.27 23.27 28.38 28.38 28.38 28.38 28.38 28.38 28.38 28.38 28.38 28.38 28.38 0.10 3.83 0.41 0.28 7.02 0.84 0.58 0.86 1.10 1.34 1.60 1.83 2.01 2.20 2.35 2.48 2.57 2.67 2.77
8.60 10.33 11.81 12.62 13.07 13.53 13.53 13.53 13.53 13.53 13.53 13.53 13.53 1.24 1.63 1.96 2.24 2.51 2.76 2.93 3.10 3.25 3.36 3.45 3.54 3.63
Financial institutions AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated Insurance AAA AA A BBB BB B CCC/C Investment-grade 0.00 0.08 0.18 0.36 1.27 2.32 0.00 0.21 0.49 1.22 2.85 4.76 0.23 0.39 0.87 2.05 4.52 7.85 0.46 0.62 1.26 2.87 6.07 0.70 0.80 1.65 3.66 0.95 1.00 2.03 4.32 0.95 1.16 2.44 4.81 0.95 1.32 2.69 5.37 0.95 1.49 2.85 6.00 0.95 1.61 3.16 6.36 0.95 1.73 3.50 6.57 0.95 1.80 3.65 6.57 0.95 1.88 3.83 7.10 0.95 1.96 3.94 7.70 0.95 2.06 4.20 8.05 0.00 0.00 0.22 0.95 1.60 0.37 0.00 0.59 2.33 4.69 0.75 0.00 1.05 3.65 1.13 0.00 1.52 5.14 1.51 0.00 1.92 6.59 1.90 0.00 2.35 7.86 2.31 0.00 2.70 2.74 0.00 3.06 3.17 0.00 3.34 3.63 0.00 3.64 4.11 0.00 3.95 4.61 0.00 4.17 5.15 0.00 4.40 5.72 0.00 4.52 6.32 0.00 4.66
9.05 10.29 11.73 12.97 14.00 15.24 16.43 17.90 19.53
9.36 12.87 14.91 17.04 17.78 18.30 18.56 19.12 19.99 20.92 21.25 21.25 21.25
6.22 13.06 17.80 20.83 22.98 25.32 26.54 27.39 28.29 28.77 29.30 29.30 29.30 29.30 29.30 25.58 29.18 33.12 35.96 39.01 40.58 42.14 43.70 43.70 43.70 43.70 43.70 43.70 43.70 43.70 0.39 1.00 1.62 2.30 2.94 3.53 4.08 4.65 5.24 5.78 6.27 6.78 7.27 7.80 8.38
5.56 10.13 14.75 18.01 20.17 22.31 23.29 24.01 24.46 24.94 25.61 26.15 26.35 26.35 26.35 1.55 3.02 4.50 5.72 6.68 7.59 8.22 8.82 9.39 9.91 10.44 10.95 11.38 11.81 12.26
7.75 10.56 13.37 16.19 19.36 21.41 24.25 26.12 26.79 27.51 28.27
9.29 10.38 11.01 11.74 11.74 11.74 13.77 17.13 18.30 19.55 20.97 22.46
30.77 41.59 41.59 41.59 41.59 41.59 45.02 48.95 48.95 48.95 48.95 48.95 48.95 48.95 48.95 0.16 0.47 0.84 1.23 1.60 1.94 2.22 2.45 2.65 2.84 3.03 3.11 3.26 3.39 3.54

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Table 9
Financials And Utilities (cont.)

Speculative-grade All rated Utility AAA AA A BBB BB B CCC/C Investment grade Speculative grade All rated 0.00 0.00 0.06 0.23 0.63 4.47 0.00 0.00 0.12 0.52 1.96 0.00 0.00 0.21 0.77 3.35 0.00 0.00 0.30 1.06 4.61 0.00 0.00 0.40 1.34 6.13 0.00 0.00 0.50 1.63 7.34 0.00 0.00 0.63 1.86 7.34 0.00 0.00 0.77 2.11 7.34 0.00 0.00 0.95 2.28 7.34 0.00 0.10 1.10 2.51 7.86 0.00 0.20 1.25 2.85 7.86 0.00 0.40 1.38 3.11 7.86 0.00 0.50 1.51 3.39 7.86 0.00 0.61 1.65 3.68 7.86 0.00 0.73 1.80 3.93 8.21 3.58 0.47 6.02 0.96 8.05 1.48 9.47 10.86 12.81 15.04 17.06 19.06 20.98 23.83 25.36 26.18 27.08 28.03 1.95 2.40 2.87 3.29 3.64 3.95 4.26 4.61 4.78 4.97 5.16 5.37
9.48 12.94 15.08 15.82 16.61 18.36 20.40 22.90 24.46 26.26 27.21 28.19 29.20 30.26
21.95 24.64 24.64 24.64 27.66 27.66 30.95 34.78 39.13 44.66 51.58 61.26 70.95 80.63 80.63 0.12 2.74 0.41 0.28 5.29 0.82 0.42 7.29 1.16 0.58 0.74 0.90 1.05 1.20 1.35 1.52 1.73 1.92 2.09 2.28 2.46
8.78 10.11 11.14 11.83 12.58 13.42 14.34 14.96 15.39 15.84 16.32 16.83 1.46 1.74 1.99 2.19 2.40 2.61 2.84 3.08 3.29 3.49 3.70 3.90
Y-Year. Source: Standard & Poors Global Fixed Income Research and Standard & Poors CreditPro.
Table 10
Heavy Industries
Aerospace and defense --Time horizon-(%) AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated Automotive AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated 0.00 0.00 0.00 0.00 1.59 0.00 0.00 0.00 0.82 3.81 0.00 0.00 0.00 1.24 0.00 0.00 0.00 1.67 0.00 0.00 0.00 3.84 0.00 0.00 0.00 7.36 0.00 0.00 0.57 0.00 0.00 1.16 0.00 0.00 2.36 0.00 0.00 3.57 0.00 0.00 4.80 0.00 0.00 6.68 0.00 0.00 0.00 0.00 0.00 0.00 Y1 0.00 0.00 0.00 0.00 0.60 2.96 Y2 0.00 0.00 0.00 0.38 1.21 Y3 0.00 0.00 0.00 0.77 2.50 Y4 0.00 0.00 0.00 1.17 3.50 Y5 0.00 0.00 0.00 1.58 4.54 Y6 0.00 0.00 0.00 2.00 5.25 Y7 0.00 0.00 0.00 2.44 6.38 Y8 0.00 0.00 0.00 2.44 6.78 Y9 0.00 0.00 0.00 2.44 7.62 Y10 0.00 0.00 0.00 2.44 8.06 Y11 0.00 0.00 0.00 2.44 8.53 Y12 0.00 0.00 0.00 2.44 8.53 Y13 0.00 0.00 0.00 2.44 8.53 Y14 0.00 0.00 0.00 2.44 8.53 Y15 0.00 0.00 0.00 2.44 9.13
7.27 10.47 12.15 12.85 13.61 14.41 15.27 16.20 17.17 17.68 18.23 18.82 19.48 19.48
50.00 70.00 75.00 75.00 75.00 81.25 81.25 81.25 81.25 81.25 81.25 81.25 81.25 81.25 81.25 0.00 3.17 1.72 0.17 6.17 3.41 0.35 8.50 4.74 0.53 0.72 0.91 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10
9.80 10.65 11.54 12.48 13.08 13.93 14.61 15.08 15.33 15.60 15.89 16.20 5.51 6.04 6.59 7.16 7.46 7.87 8.19 8.41 8.53 8.65 8.78 8.92
8.60 10.60 12.01
9.60 11.44 12.90 13.93 16.12 18.49 20.38 22.39 24.54
6.98 11.98 17.20 21.09 25.21 29.63 33.70 36.81 37.79 38.31 39.45 40.69 41.99
7.69 16.26 23.82 28.67 31.75 33.41 34.12 35.98 37.16 38.41 40.16 40.62 41.11 41.65 42.85 23.33 30.00 35.38 39.84 44.47 49.10 54.19 54.19 54.19 54.19 54.19 54.19 54.19 54.19 54.19 0.00 0.40 0.61 0.82 1.87 3.57 4.88 6.00 7.16 8.11 9.60 11.41 13.02 14.70 16.18
6.16 11.88 17.34 22.20 26.34 29.23 31.81 34.75 37.17 39.16 40.44 40.90 41.63 42.42 43.56 3.94 7.68 11.12 14.14 17.01 19.38 21.39 23.50 25.32 26.81 28.15 29.21 30.32 31.50 32.76

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Table 10
Heavy Industries (cont.)

Capital goods AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated Transportation AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated 0.00 0.00 0.00 0.22 1.25 0.00 0.00 0.00 0.66 4.04 0.00 0.00 0.00 1.22 7.14 0.00 0.00 0.19 1.80 0.00 0.00 0.38 2.52 0.00 0.00 0.57 3.13 0.00 0.00 0.77 3.76 0.00 0.00 0.97 4.16 0.00 0.00 1.17 4.29 0.00 0.00 1.17 4.72 0.00 0.00 1.17 5.17 0.00 0.00 1.17 5.81 0.00 0.00 1.17 6.50 0.00 0.00 1.17 7.25 0.00 0.00 1.61 8.26 0.00 0.00 0.00 0.33 0.73 4.19 0.00 0.00 0.00 0.68 2.41 0.00 0.00 0.00 1.04 4.49 0.00 0.00 0.00 1.61 6.16 0.00 0.00 0.00 1.99 7.57 0.00 0.00 0.15 2.60 8.90 0.00 0.00 0.45 3.02 0.00 0.00 0.60 3.46 0.00 0.00 0.76 4.15 0.00 0.00 0.93 4.88 0.00 0.00 1.10 5.13 0.00 0.00 1.45 5.13 0.00 0.00 1.82 5.13 0.00 0.00 2.01 5.44 0.00 0.00 2.22 5.44
9.51 10.84 12.04 12.83 13.40 14.34 15.02 15.77 16.19
9.78 14.95 19.50 23.35 26.45 29.16 30.26 31.26 32.34 33.50 34.76 36.16 37.41 38.80 n/a 2.58 n/a 2.77 n/a 2.97 n/a 3.08
29.07 38.69 46.35 55.29 60.08 61.90 64.14 64.14 64.14 64.14 64.14 0.13 4.05 2.13 0.26 0.39 0.60 0.74 1.03 1.33 1.57 1.89 2.23 2.40
8.23 12.24 15.77 18.62 20.89 22.65 23.80 24.84 25.76 26.63 27.72 28.76 29.75 30.68 4.31 6.39 8.23 9.69 10.91 11.88 12.52 13.14 13.71 14.17 14.70 15.21 15.69 16.08
9.85 11.93 14.59 16.64 19.07 21.91 24.36 26.58 27.90 29.28 30.36 30.74
7.92 16.24 22.96 27.41 30.68 33.17 35.84 37.85 39.06 40.34 41.69 42.04 42.40 43.17 43.97 32.14 46.23 50.36 54.88 60.29 62.28 62.28 62.28 62.28 62.28 62.28 62.28 62.28 62.28 62.28 0.11 0.33 0.60 0.94 1.34 1.69 2.05 2.29 2.41 2.60 2.80 3.07 3.36 3.65 4.18
6.85 13.14 18.02 21.65 24.46 26.97 29.15 31.22 33.13 34.88 36.56 37.36 38.20 39.07 39.61 2.60 5.03 6.95 8.44 9.67 10.75 11.70 12.51 13.19 13.84 14.47 14.89 15.33 15.79 16.31
Table 11
Advanced Industries
Chemicals, packaging, and environmental services --Time horizon-(%) AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated Healthcare AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Y1 0.00 0.00 0.00 0.15 1.21 4.51 Y2 0.00 0.00 0.16 0.47 3.48 Y3 0.00 0.00 0.32 0.95 6.00 Y4 0.00 0.00 0.48 1.63 Y5 0.00 0.00 0.64 2.34 Y6 0.00 0.00 0.81 3.08 Y7 0.00 0.00 1.15 3.65 Y8 0.00 0.00 1.50 4.25 Y9 0.00 0.00 1.86 4.87 Y10 0.00 0.00 2.22 5.53 Y11 0.00 0.00 2.41 6.22 Y12 0.00 0.00 2.61 6.71 Y13 0.00 0.00 2.81 7.24 Y14 0.00 0.00 3.02 8.10 Y15 0.00 0.00 3.23 8.74
8.61 11.19 14.26 16.47 17.87 19.18 20.13 20.40 20.99 21.31 21.31 21.70
9.71 14.52 18.44 21.61 23.93 26.30 28.52 30.57 32.57 34.45 36.20 37.43 38.09 38.46
44.00 56.92 59.79 59.79 59.79 59.79 59.79 59.79 79.90 79.90 79.90 79.90 79.90 79.90 79.90 0.07 4.23 2.36 0.30 0.60 1.00 1.40 1.81 2.24 2.68 3.13 3.60 3.99 4.29 4.61 5.06 5.42
8.34 12.05 15.27 18.09 20.72 22.96 24.73 26.47 27.90 28.94 30.08 30.86 31.20 31.57 4.69 6.81 8.68 10.32 11.83 13.13 14.18 15.20 16.07 16.72 17.36 17.85 18.24 18.59

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Table 11
Advanced Industries (cont.)

AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated High technology AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated 0.00 0.00 0.00 0.44 0.25 2.67 0.00 0.00 0.00 0.91 1.30 5.67 0.00 0.00 0.00 1.16 2.83 0.00 0.00 0.00 1.69 4.14 0.00 0.00 0.00 2.25 5.06 0.00 0.00 0.00 2.84 5.88 0.00 0.00 0.30 3.16 6.93 0.00 0.00 0.62 3.49 8.24 0.00 0.00 0.62 4.20 9.44 0.00 0.00 0.62 5.74 0.00 0.00 0.98 6.15 0.00 0.00 1.74 7.08 0.00 0.00 2.54 7.62 0.00 0.00 3.40 7.62 0.00 0.76 3.86 7.62 0.00 0.00 0.00 0.48 2.34 0.00 0.00 0.25 1.97 5.18 0.00 0.00 0.51 3.54 7.74 0.00 0.00 1.06 5.01 0.00 0.00 1.66 6.37 0.00 0.00 1.97 7.20 0.00 0.00 1.97 8.09 0.00 0.00 1.97 8.33 0.00 0.00 1.97 8.87 0.00 0.00 1.97 9.17 0.00 0.00 2.50 9.17 0.00 0.00 2.50 9.17 0.00 0.00 2.50 0.00 0.00 2.50 0.00 0.00 2.50
9.58 10.04 10.04
9.25 10.28 11.61 13.26 14.37 15.23 15.71 16.26 16.90 18.07 19.00 20.58
17.72 24.47 27.37 30.60 34.16 36.04 36.04 36.04 38.17 38.17 38.17 38.17 38.17 38.17 38.17 0.00 2.36 1.46 0.09 4.89 3.04 0.19 7.11 4.42 0.39 8.68 5.43 0.60 0.71 0.71 0.71 0.71 0.71 0.86 0.86 0.86 0.86 0.86
9.94 11.09 12.35 13.05 13.84 14.22 14.51 14.83 15.59 16.25 17.00 6.26 6.96 7.68 8.06 8.49 8.69 8.90 9.07 9.42 9.72 10.06
9.88 10.84 11.11 11.11 11.45 12.21
8.10 10.24 11.95 12.82 13.54 13.80 14.08 14.54 14.71 15.07 15.48 15.70 15.70
21.43 30.56 34.22 36.27 38.47 40.67 40.67 40.67 42.95 42.95 42.95 42.95 42.95 42.95 42.95 0.18 2.25 1.56 0.37 4.70 3.24 0.47 6.82 4.67 0.68 0.90 1.12 1.36 1.60 1.86 2.39 2.67 3.27 3.76 4.10 4.48
8.65 10.06 10.96 11.78 12.45 13.17 13.61 14.08 14.40 14.64 14.90 15.19 5.94 6.93 7.58 8.18 8.69 9.23 9.70 10.10 10.53 10.86 11.16 11.48
Telecommunications AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated 0.00 0.00 0.00 0.80 0.64 0.00 0.00 0.15 1.34 2.20 0.00 0.00 0.30 1.34 5.03 0.00 0.00 0.45 1.63 0.00 0.00 0.76 1.92 0.00 0.00 1.08 1.92 0.00 0.00 1.40 1.92 0.00 0.00 1.74 1.92 0.00 0.00 2.08 1.92 0.00 0.00 2.26 2.30 0.00 0.00 2.45 2.71 0.00 0.00 2.64 3.16 0.00 0.18 2.64 3.66 0.58 0.18 2.64 4.20 1.18 0.18 2.64 4.79
8.25 10.35 12.05 13.27 13.93 14.65 15.42 15.42 15.42 15.91 16.46 16.46
3.53 10.24 16.47 21.26 24.92 27.45 28.93 29.83 30.62 31.49 32.46 33.26 33.58 33.96 34.44 34.87 48.97 54.49 57.38 58.82 59.56 60.32 61.18 61.18 61.18 63.22 65.52 65.52 65.52 65.52 0.16 0.33 0.39 0.50 0.67 0.79 0.91 1.03 1.15 1.28 1.41 1.54 1.68 1.83 1.98
5.67 11.60 16.75 20.87 23.83 25.91 27.24 28.07 28.76 29.51 30.21 30.82 31.16 31.57 31.81 2.73 5.51 7.82 9.65 10.98 11.88 12.45 12.82 13.14 13.46 13.76 14.03 14.22 14.42 14.59
Table 12
Consumer-Reliant Sectors
Consumer products --Time horizon-(%) AAA AA A BBB Y1 0.00 0.00 0.00 0.00 Y2 0.00 0.00 0.00 0.31 Y3 0.00 0.00 0.00 0.84 Y4 0.00 0.00 0.09 1.73 Y5 0.00 0.00 0.19 2.77 Y6 0.00 0.00 0.29 3.74 Y7 0.00 0.00 0.60 4.63 Y8 0.00 0.00 1.12 5.44 Y9 0.00 0.00 1.55 5.87 Y10 0.00 0.00 1.99 6.33 Y11 0.00 0.00 2.34 6.82 Y12 0.00 0.00 2.34 7.34 Y13 0.00 0.00 2.34 7.53 Y14 0.00 0.00 2.48 7.74 Y15 0.00 0.00 2.62 8.43

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Table 12
Consumer-Reliant Sectors (cont.)

BB B CCC/C Investment-grade Speculative-grade All rated 1.28 2.91 5.43 8.27 10.80 13.22 15.40 17.33 18.52 19.98 20.71 21.10 21.52 22.19 22.92 4.31 10.23 15.22 18.90 21.75 24.45 26.04 27.14 27.94 28.92 29.95 30.95 31.77 32.68 33.18 23.83 35.80 42.28 46.17 49.71 50.49 51.36 52.33 54.36 55.50 56.73 58.01 59.28 59.28 59.28 0.00 4.55 2.39 0.12 0.31 0.68 1.10 1.48 1.92 2.43 2.76 3.10 3.41 3.57 3.62 3.74 4.00
9.37 13.58 16.96 19.73 22.20 23.96 25.36 26.37 27.53 28.45 29.24 29.94 30.70 31.25 4.97 7.24 9.14 10.74 12.14 13.21 14.12 14.75 15.45 16.02 16.43 16.75 17.13 17.50
Homebuilders/real estate companies AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All Rated 0.00 0.00 0.00 0.00 0.69 0.00 0.00 0.00 0.18 3.19 0.00 0.00 0.61 0.36 6.67 0.00 1.39 1.24 0.65 7.80 0.00 2.79 1.24 0.86 0.00 4.25 1.24 0.97 0.00 5.77 1.24 1.08 0.00 7.35 1.24 1.21 0.00 0.00 0.00 0.00 0.00 0.00 0.00
9.01 10.74 12.54 14.45 16.43 18.52 20.73 1.24 1.49 1.24 1.96 1.24 2.32 1.24 2.32 1.24 2.32 1.24 2.32 1.24 2.32
9.59 11.50 13.90 16.46 18.81 19.66 20.14 20.67 21.28 22.00 23.68
6.15 14.69 21.37 27.50 29.86 32.34 32.99 33.67 34.36 35.07 36.55 38.10 39.77 42.43 44.31 40.48 45.65 48.37 48.37 48.37 48.37 48.37 48.37 48.37 52.06 55.75 59.43 64.50 64.50 64.50 0.00 4.90 1.57 0.13 0.34 0.78 1.08 1.32 1.58 1.85 2.26 2.81 3.30 3.58 3.89 4.27 4.73
9.58 14.04 16.69 18.55 20.54 22.23 24.01 25.66 26.66 27.75 28.93 30.27 31.80 33.51 3.09 4.56 5.63 6.38 7.13 7.79 8.51 9.29 9.98 10.66 11.23 11.87 12.63 13.54
Media and entertainment AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated Retail/restaurants AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated 0.00 0.00 0.00 0.31 0.97 0.00 0.00 0.00 0.95 2.98 0.00 0.57 0.00 1.45 5.60 0.00 1.16 0.16 2.47 7.90 0.00 1.76 0.32 4.23 0.00 2.37 0.82 6.06 0.00 3.61 1.33 7.78 6.25 12.50 18.75 18.75 18.75 18.75 18.75 18.75 4.24 1.85 4.88 2.73 4.88 4.18 4.88 5.12 4.88 5.89 4.88 6.30 4.88 6.72 4.88 7.16 0.00 0.00 0.00 0.15 1.02 0.00 0.00 0.00 0.15 3.40 0.00 0.00 0.25 0.77 5.87 0.00 0.00 0.50 1.73 0.00 0.00 0.76 2.89 0.00 0.00 1.03 4.27 0.00 0.00 1.30 5.73 0.00 0.00 1.58 7.48 0.00 0.00 1.87 0.00 0.00 2.19 0.00 0.00 2.52 0.00 0.00 2.87 0.00 0.00 3.62 0.00 0.00 4.01 0.00 0.00 4.85
9.14 10.47 11.44 12.24 13.14 13.83 13.83
8.35 10.87 13.23 15.12 16.70 17.84 19.06 20.37 21.90 23.43 24.66 26.21
4.23 10.03 14.91 18.91 22.09 24.87 27.67 29.95 32.24 34.36 35.51 36.24 36.59 37.00 37.49 26.82 37.28 44.63 49.71 51.60 52.58 52.58 52.58 52.58 52.58 52.58 52.58 53.68 54.79 54.79 0.08 0.08 0.50 1.10 1.81 2.63 3.48 4.47 5.40 6.16 6.75 7.24 7.92 8.35 8.67
5.10 10.07 14.26 17.75 20.57 23.04 25.26 27.07 28.71 30.30 31.43 32.44 33.33 34.12 35.03 3.88 7.60 10.83 13.55 15.78 17.79 19.61 21.18 22.60 23.94 24.89 25.74 26.55 27.22 27.93
9.38 10.89 12.04 13.03 13.29 13.88 14.19 14.52
9.46 11.26 13.32 15.51 17.31 19.06 20.96 23.02 24.28 25.14 26.12
4.85 11.25 17.51 22.99 27.76 31.23 34.30 36.68 39.07 41.13 42.80 44.14 45.41 46.61 47.74 37.98 52.04 63.38 69.95 75.13 78.38 79.51 80.72 82.10 83.59 83.59 83.59 83.59 83.59 83.59 0.13 0.41 0.69 1.26 2.14 3.19 4.27 5.31 6.47 7.68 8.49 8.97 9.37 9.68 10.02
5.31 10.56 15.79 20.16 23.75 26.57 29.16 31.40 33.51 35.42 37.08 38.62 39.83 40.87 41.90 3.30 6.59 9.83 12.66 15.11 17.17 19.09 20.78 22.45 24.03 25.28 26.31 27.13 27.81 28.49

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Table 13
Raw Materials/Commodities
Forest products and building materials --Time horizon-(%) AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated Y1 0.00 0.00 0.42 0.54 0.76 Y2 0.00 0.00 0.85 1.10 2.52 Y3 0.00 0.00 1.06 1.69 4.74 Y4 0.00 0.00 1.71 2.29 Y5 0.00 0.00 2.59 2.50 Y6 0.00 2.04 3.03 3.36 Y7 0.00 4.08 3.25 4.49 Y8 0.00 6.12 3.48 6.37 Y9 0.00 Y10 0.00 Y11 0.00 Y12 0.00 Y13 0.00 Y14 0.00 Y15 0.00
8.16 12.24 16.33 18.37 20.41 22.45 24.54 3.71 3.71 3.71 3.71 3.97 4.24 4.80
8.60 10.42 12.07 12.65 13.58 14.58 15.64
7.03 10.30 13.73 17.36 20.14 22.27 25.03 26.78 28.93 29.90 30.61 30.99
5.11 12.23 18.74 25.44 29.84 33.55 36.34 39.34 42.38 44.92 46.80 48.24 49.81 50.83 51.97 33.33 45.83 57.24 63.57 68.54 68.54 68.54 70.29 72.14 74.13 76.49 79.42 82.36 85.89 85.89 0.46 0.94 1.32 1.92 2.42 3.15 3.90 4.99 6.23 7.27 8.24 8.61 9.26 9.95 10.82
4.97 10.23 15.24 20.05 23.99 27.36 30.33 33.15 35.70 38.29 40.12 41.92 43.26 44.23 44.94 2.93 6.00 8.87 11.70 14.00 16.09 17.95 19.90 21.76 23.52 24.88 25.91 26.86 27.65 28.43
Metals, mining, and steel AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated Oil and gas AAA AA A BBB BB B CCC/C Investment-grade Speculative-grade All rated 0.00 0.00 0.12 0.09 0.54 0.00 0.00 0.36 0.18 1.90 0.00 0.24 0.49 0.37 3.45 0.00 0.49 0.62 0.67 5.19 0.00 0.74 0.76 0.99 6.51 0.00 1.00 1.04 1.22 7.90 0.00 1.26 1.19 1.46 8.34 0.00 1.26 1.34 1.60 8.83 0.00 1.26 1.66 1.74 9.18 0.00 1.26 2.00 1.90 9.37 0.00 1.26 2.18 2.25 0.00 1.26 2.56 2.64 0.00 1.26 2.76 2.64 0.00 1.26 2.99 2.64 0.00 1.26 2.99 2.91 n/a 0.00 0.00 0.28 1.28 n/a 0.00 0.00 0.57 4.39 n/a 0.00 0.00 0.87 7.18 n/a 0.00 0.00 1.83 n/a 0.00 0.00 3.19 n/a 0.00 0.69 4.25 n/a 0.00 0.69 5.00 n/a 0.00 0.69 6.17 n/a 0.00 1.46 6.99 n/a 0.00 2.27 7.41 n/a 0.00 3.10 8.32 n/a 0.00 3.97 9.30 n/a 0.00 4.87 n/a 0.00 4.87 n/a 0.00 4.87
9.83 10.42 10.42
9.61 10.88 12.50 14.20 15.70 17.94 20.33 22.54 24.12 25.81 26.72 28.72
5.20 11.73 17.71 22.79 26.98 31.34 34.73 37.92 39.39 40.34 41.34 42.42 43.99 45.26 47.16 28.36 39.26 42.46 44.44 52.67 57.18 59.86 62.72 68.46 71.96 71.96 71.96 71.96 81.31 81.31 0.18 0.38 0.57 1.19 2.04 2.91 3.36 4.08 4.81 5.32 6.13 6.99 7.60 7.92 7.92
4.95 10.33 14.83 18.65 21.82 25.01 27.59 29.99 31.99 33.69 35.18 36.43 37.97 39.22 41.07 3.43 7.13 10.22 12.98 15.38 17.76 19.59 21.36 22.88 24.12 25.33 26.41 27.56 28.44 29.54
9.80 10.04 10.30 10.30 10.30
6.00 11.07 14.57 17.09 19.30 20.79 21.61 22.28 22.76 23.27 23.27 23.27 23.27 23.27 23.67 17.65 28.32 34.62 37.98 39.70 39.70 40.59 41.49 42.40 43.38 44.45 45.63 46.99 48.64 48.64 0.08 4.16 1.80 0.20 0.37 0.58 0.81 1.05 1.25 1.35 1.52 1.69 1.88 2.15 2.22 2.30 2.38
7.79 10.51 12.69 14.39 15.70 16.33 16.93 17.38 17.78 18.11 18.34 18.60 18.75 18.92 3.38 4.59 5.60 6.42 7.08 7.44 7.73 8.01 8.26 8.50 8.75 8.89 8.99 9.10
Appendix IV: Gini Methodology

To measure ratings performance or ratings accuracy, we plot the cumulative share of issuers by rating against the

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cumulative share of defaulters in a Lorenz curve to show the accuracy of its rank ordering. Max O. Lorenz developed the Lorenz curve as a graphical representation of the proportionality of a distribution. To build the Lorenz curve, we order the observations from the low end of the ratings scale ('CC') to the high end ('AAA'). If the rank order of Standard & Poor's corporate ratings only randomly approximated default risk, the curves would fall along the diagonal. Thus, its Gini coefficient, which is a summary statistic of the Lorenz curve, would be zero. If corporate ratings were perfectly rank ordered so that all defaults occurred only among the lowest-rated entities, the curve would capture all of the area above the diagonal on the graph, and its Gini coefficient would be one (see chart 37). To calculate the Gini coefficients, as shown in chart 37, we would divide area B by the total area A plus B. In other words, the Gini coefficient captures the extent to which actual ratings accuracy diverges from the random scenario.
Chart 37
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U.S. Economic Forecast: Legends Of The Fall, Sept. 13, 2013 The U.S. Corporate Default Rate Is Forecasted To Rise To 3.1% By June 2014, Aug. 13, 2013 2012 Annual Global Corporate Default Study And Rating Transitions, March 18, 2013 Why Settle For Average?: Understanding The Variation In Corporate Default Rates And Ratings Transitions, Sept. 19, 2012

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S&P Industry Overview: A Long-Term Analysis of 19 U.S. Industry Sectors

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S&P Industry Overview: A Long-Term Analysis of 19 U.S. Industry Sectors

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Credit Trends:

Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

Introduction And Overview

Heavy Industries Aerospace and Defense Automotive Capital Goods Transportation

Advanced Industries Chemicals, Packaging, and Environmental Services Health Care

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

Time To Default From Original Rating

7.51 7.44 7.54 8.14 0.00

5.53 4.35 6.58 4.33 0.00

6.15 7.27 5.14 7.58 0.00

22.44 28.59 19.84 24.19

52.38 30.99 71.70 46.67 0.00

5.14 7.52 6.54 6.87 0.00

3.82 5.25 4.97 3.88 0.00

3.56 7.02 4.95 6.95 0.00

15.27 27.99 23.35 30.87

4.00 13.43 10.23 14.13 0.00

5.14 5.92 4.49 0.00

3.37 3.99 3.53 0.00

4.09 5.86 3.51 0.00

17.00 28.45 21.37

3.45 9.09 1.67 0.00

169 B+ 41 B+ 245 B+ 170 B+

6.53 6.46 5.71 7.10 0.00

4.82 3.57 3.97 5.57 0.00

5.56 6.95 4.89 5.38 0.00

28.23 28.78 27.92 25.91

9.47 17.07 5.71 15.29 0.00

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Credit Trends: Industry Overview: A Long-Term Analysis Of 19 U.S. Industry Sectors

Time To Default From Original Rating (cont.)

Weighted Average Gini Coefficients By Sector

NOVEMBER 12, 2013 18