Standard & Poor’s says that the global corporate speculative-grade bond default rate fell to 1.60% at the end of October.

The default rate is “a smidgen lower than one month ago but marginally higher than the eight-year low of 1.58% recorded in March of this year”, according to a report released today by Standard & Poor’s Ratings Services.

The global speculative-grade default rate has remained below the long-term (1981-2004) average of 4.96% for 23 consecutive months but is still higher than the record low of 1.31% posted in the second quarter of 1997. The report states that the near-term default outlook has been mostly sanguine, owing to expectations of relative economic stability, relatively favorable financing conditions, and healthy corporate profitability.

The global default rate is expected to edge up slowly from its trough before the end of 2005. Indeed, in the U.S., the trailing three-month default rate has been edging up since July, S&P adds. “Results from a proprietary default forecast model indicate that U.S. speculative-grade default rates will continue to edge up slowly in the next few quarters, reaching 2.8% by the third quarter of 2006,” explained Diane Vazza, head of Standard & Poor’s Global Fixed Income Research Group.

The average forecast for the next four quarters (2.5%) is slightly higher than the historical average of the trailing four quarters (2.1%). As of Nov. 7, 2005, a total of 17 entities remained vulnerable to default on rated debt worth US$4.9 billion, which is two fewer than a month earlier and lower than the average of 30 entities recorded over full-year 2004.