Moody’s Investors Service’s forecast for the global speculative-grade default rate has improved in recent months, although the rate is expected to continue rising throughout the rest of the year.

The rating agency reports that the global speculative-grade default rate rose to 10.1% in the second quarter, up from 7.4% in the previous quarter. The rate has risen sharply over the past year; 12 months ago, it stood at just 2%. Moreover, the rating agency’s forecasting model now predicts that the global default rate will continue to rise, peaking at 12.8% in the fourth quarter.

However, it also sees the rate quickly declining back to just 6% a year from now. “Moody’s model-based default rate forecasts have fallen in recent months as high-yield bond spreads have continued to narrow. Looking forward into 2010, under our baseline economic scenario, default rates are expected to decline significantly as many of the weakest rated credits going into this cycle will have defaulted, leaving a pool of relatively stronger issuers,” said Moody’s director of default research, Kenneth Emery.

Moody’s speculative-grade corporate distress index, which measures the percentage of rated issuers that have debt trading at distressed levels, was 36.7% at the end of the second quarter, down from 51.3% in the previous quarter.

A total of 163 Moody’s-rated corporate debt issuers have defaulted so far this year, of which 76 were recorded in the second quarter, it reports. In comparison, there were 16 and 20 defaults in the first and second quarter of last year, respectively.

Looking by region, Moody’s reports that the U.S. speculative-grade default rate ended the second quarter at 11%, up from 8% in the previous quarter. Moody’s model now predicts that the U.S. default rate will peak at 12.9% in the fourth quarter before declining to 5% by June 2010. The European rate is expected to peak at 15% in the fourth quarter before falling to 12.5% by June of next year.

“The higher forecasted European default rates are largely the result of weaker economics as reflected in higher spreads and a relatively higher unemployment rate,” it says.

On a sector basis, Moody’s forecasts that the automotive sector will be the most troubled in the U.S. and the durable consumer goods sector will have the highest default rate in Europe.