What is the historical default probability of a BBB rating?
By the 10BONDS editorial team
Short answer: according to S&P's long-run averages, a BBB-rated issuer defaulted in 0.16% of cases within 1 year, 1.44% within 5 years and 3.52% within 10 years. Out of 100 BBB issuers, on average fewer than 4 defaulted over ten years.
The table shows average cumulative default rates for each rating notch, from 1 to 15 years. A cumulative rate is the share of issuers with that rating at the start of the period that defaulted by the end of it.
Cumulative default rates by rating (%)
| Rating | 10BONDS risk | 1 year | 3 years | 5 years | 7 years | 10 years | 15 years |
|---|---|---|---|---|---|---|---|
| AAA | 1 | 0.00% | 0.03% | 0.13% | 0.25% | 0.44% | 0.58% |
| AA+ | 2 | 0.00% | 0.05% | 0.15% | 0.29% | 0.52% | 0.77% |
| AA | 2 | 0.02% | 0.10% | 0.25% | 0.43% | 0.70% | 1.05% |
| AA− | 2 | 0.03% | 0.15% | 0.36% | 0.57% | 0.88% | 1.34% |
| A+ | 3 | 0.04% | 0.18% | 0.39% | 0.65% | 1.10% | 1.82% |
| A | 3 | 0.05% | 0.22% | 0.48% | 0.81% | 1.38% | 2.19% |
| A− | 3 | 0.07% | 0.28% | 0.57% | 0.98% | 1.65% | 2.52% |
| BBB+ | 4 | 0.11% | 0.46% | 0.98% | 1.58% | 2.54% | 4.02% |
| BBB | 5 | 0.16% | 0.71% | 1.44% | 2.27% | 3.52% | 5.38% |
| BBB− | 6 | 0.27% | 1.22% | 2.84% | 4.08% | 5.92% | 8.44% |
| BB+ | 7 | 0.39% | 1.85% | 3.65% | 5.52% | 8.05% | 11.22% |
| BB | 7 | 0.63% | 2.87% | 5.48% | 7.92% | 11.08% | 14.88% |
| BB− | 7 | 0.95% | 4.22% | 7.98% | 11.25% | 15.18% | 19.65% |
| B+ | 8 | 1.75% | 6.20% | 10.42% | 13.95% | 18.22% | 23.40% |
| B | 8 | 3.32% | 10.32% | 15.65% | 19.68% | 24.33% | 29.50% |
| B− | 8 | 6.25% | 16.48% | 23.10% | 27.95% | 33.15% | 38.80% |
| CCC+ | 9 | 15.40% | 28.50% | 35.80% | 40.10% | 44.90% | 49.50% |
| CCC / C | 9–10 | 26.63% | 40.85% | 46.90% | 50.41% | 54.21% | 57.86% |
Source: S&P, average cumulative corporate default rates by rating notch (long-run historical average). The "10BONDS risk" column shows which 1-10 risk score each rating corresponds to in our bond finder.
How to read the table
As the rating falls, the default probability rises, and not in a straight line: at 5 years it goes from 1.44% for BBB to 2.84% for BBB−, then jumps to 5.48% for BB, the first fully speculative-grade notch. The line between investment grade (down to BBB−) and speculative grade (BB+ and below) is where risk changes pace.
Time matters as much as the rating. A 1-year probability cannot be compared with a 10-year one: for a BBB bond maturing in 5 years, the column to look at is the 5-year one.
What the table does not tell you
- These are past averages across many issuers and economic cycles, not a forecast for any single issuer.
- Default does not mean losing everything: how much is recovered depends on the bond's seniority and collateral.
- The data covers companies; government bonds have a different default history.
For how ratings, default probability and expected loss fit together, read the guides on bond credit risk and investment-grade bonds.
Related guides
Information and education only, not investment advice or an offer to buy or sell. Yields are gross and indicative and can change. Bonds can lose value and issuers can default. Disclaimer