The trailing 12-month global speculative-grade default rate closed at 4.8% in August, unchanged from the prior month, the Moody’s Investors Services says in its latest global default monitor.
Only seven Moody’s-rated companies defaulted in August, which was the lowest total for the year.
The credit rating agency expects the 2016 default rate to peak at 5.0% in November before easing off to 3.6% a year from now.
“Our benign default outlook is consistent with relatively low high-yield spreads,” says Sharon Ou, vice president and senior credit officer at Moody’s, in a news release. “The default rate will likely remain under control as long as accommodating credit markets continue to provide sufficient liquidity for speculative-grade companies to refinance their debt as needed.”
Nevertheless, Moody’s says the commodity sectors “will continue to remain under stress in the coming year.” It expects the metals and mining sector will have the highest default rate in the U.S., followed by the oil and gas sector.
“Low oil prices will continue to create cash flow problems for oil and gas companies, and their access to sources of funding will remain somewhat limited,” Moody’s says.
Moody’s expects the default rate to hit 6.2% in the U.S. by the end of the year, before declining to 4.5% over the coming 12 months.
In Europe, fewer commodities companies are in deep distress, Moody’s says, so it expects the most troubled sector will be advertising, printing and publishing.