The investment-grade annual default rate was zero, while the speculative-grade annual default rate reached 9.3%; by comparison the 2019 speculative-grade rate was 1.9%. Over the long-term period, 1995-2020, the average annual sovereign default rate was 0.9%, with an investment-grade rate of zero and a speculative-grade average annual default rate of 2.3%. In all, Fitch’s transition and default data contains 26 cohorts from 1995–2020, allowing for 26 unique one-year transition rates, 25 two-year transition rates, 24 three-year transition rates, and so forth. From these annual default rates, Fitch derives average annual default rates by weighting each cohort’s default rates by the number of ratings outstanding in the given cohort relative to the number of total ratings outstanding for all cohorts. Following the example above, the 2002 “BB” annual default rate of 2% might be followed by a 2003 “BB” annual default rate of 1%.
