The global speculative-grade default rate edged down to 1.9% in October from 2.0% in September, Moody’s Investors Service said today.

The rating agency says the global speculative-grade default rate has remained virtually unchanged since March, fluctuating near 2%, and expects it to remain near that level for the remainder of 2005

Moody’s default rate forecasting model predicts the issuer-weighted global speculative-grade default rate will rise to 3.4% by the end of October 2006. “A few deteriorating corporate credit situations have recently refocused attention on the possibility of rising defaults,” said David Hamilton, director of Corporate Default Research in New York. “However, the indicators we use to predict the direction of the default rate suggest only a gradual increase over the next six months, with an acceleration in the pace of defaults in the latter half of 2006.”

But even this pickup should not be overly steep, according to Moody’s. “It’s important to keep some perspective. The current default rate is less than half its 5% long-run annual rate, so the double-digit default rates we last saw in 2002 are extremely unlikely in all but the most dire economic scenarios,” Hamilton added.

In October, three corporate bond issuers — all based in the U.S. — defaulted on a total of $2.4 billion of bonds. Delphi Corp. was the largest October default, with approximately $2 billion of bonds, and the third largest default so far in 2005. The company filed for bankruptcy protection after failing to reach agreement on a bailout package with its top customer and former parent, General Motors Corp., and also with the United Auto Workers union.

Also defaulting in October was Refco Group LTD., LLC. It ranks as the fourth largest bankruptcy in U.S. history (with liabilities totaling approximately $49 billion), but with just $390 million of rated bonds directly affected by the default. Refco is a futures broker under investigation for hiding $430 million of debt.

Moody’s said that although the number of 2005 corporate issuer defaults continues to lag the number in 2004, defaulted bond volumes have overtaken their 2004 year-to-date levels. Year to date in 2005, 26 issuers have default on a total of $19.6 billion bonds. Over the same period in 2004, 34 issuers defaulted on $11 billion.

Among U.S. issuers, the speculative-grade default rate in October fell to 2.2%, down from 2.4% in September. The U.S. default rate was 2.9% at the opening of 2005 and 3.0% at this time last year.