Moody’s liquidity-stress index unchanged in early January

Although corporate liquidity is better than it was in early 2017, the index remains below its long-term average, the credit-rating agency reports

By: James Langton
January 20, 2017 January 20, 2017
15:00

Corporate liquidity is in a better position in early 2017 than it was a year ago, Moody’s Investors Service Inc. reports.

The credit-rating agency’s liquidity-stress index (LSI) was unchanged at 5.9% in mid-January vs the end of December in the wake of nine consecutive months of improvement.

“The LSI remains below its long-term average amid muted liquidity rating activity,” says John Puchalla, Moody’s senior vice president, in a statement. “Overall, fundamentals remain solid as energy industry woes fade and speculative-grade companies maintain ready access to the credit markets.”

In addition, a generally positive U.S. economic environment is providing support for corporate cash flows, notes Puchalla: “U.S. speculative-grade liquidity is entering 2017 on firmer footing than it entered 2016, when the energy crisis was in full swing.”

Moody’s forecasts that the U.S. speculative-grade default rate will decline to 3.8% by yearend, down from 5.7% at the end of 2016. Furthermore, it notes that the distribution of speculative grade liquidity ratings is improving and “supports a below average default rate in 2017.”