Moody’s Liquidity-Stress Index (LSI) fell for the sixth consecutive month in September, to 7.1% from 7.5% in August, the New York City-based rating agency announced on Tuesday.
The index falls when corporate liquidity appears to improve and rises when it appears to weaken.
Even as economic forecasts have deteriorated, growth has been robust enough to prevent the defaults that have afflicted the energy and mining sectors from spreading to companies in other industries, Moody’s says.
“Steady, if not robust, economic growth, along with a rebound in commodity prices and good capital market access, has largely prevented energy and mining sector woes from spreading broadly to other industries,” says John Puchalla, senior vice president at Moody’s, in a news release. “Asset sales, and debt and even equity issuance are helping energy companies shore up their liquidity, despite continued pressure on their earnings.”
That the defaults remain largely confined to the commodity sector signals fewer defaults next year, Moody’s says.
The agency is still forecasting that the U.S. speculative-grade default rate will climb to 6.4% by January, from 5.7% currently. After that, however, Moody’s expects the rate to start dropping as commodities companies’ liquidity strains ease, reaching 4.5% in August next year.