Fitch Ratings: Credit Deterioration Slows For U.S. Investment Grade Sector.

Business Editors

NEW YORK--(BUSINESS WIRE)--Dec. 10, 2002

Following a deep deterioration in credit quality beginning in the fourth quarter of 2001 through the first half of this year, the U.S. bond market continued to show signs of strain in the third quarter. Downgrades exceeded upgrades by an unhealthy dollar margin of 3:1 in the third quarter, but the pace of credit deterioration slowed relative to the first half of 2002, when the par value of downgrades exceeded upgrades by a ratio of 14:1.

In the three months ended Sept. 30, 2002, 3.7% of market volume was downgraded (affecting $91.8 billion in par value), 1.2% was upgraded ($30.7 billions), and 1.2% defaulted ($30.5 billion). In contrast, in the first half of the year, 8% of market volume was downgraded ($172 billion), just 0.6% was upgraded ($12.4 billion), and 1.9% defaulted ($40.2 billion).

Downgrades in the third quarter hit the non-investment-grade sector most heavily, with $41.1 billion in downgrades towering over upgrades of $1.6 billion. On the other hand, rating activity in the investment-grade sector improved substantially compared with the first half of the year. In the third quarter, the dollar volume of downgrades exceeded upgrades by a ratio less than 2:1. In the first half of the year, investment-grade downgrades of $141.7 billion had stood head and shoulders above the $2.5 billion in upgrades.

The report, 'U.S. Bond Market Still Strained in Third Quarter', is available on the Fitch Ratings web site at 'www.fitchratings.com' in the 'Credit Market Research' section under 'Research', or by contacting the Ratings Desk at 800/893-4824.