Moody’s Investors Service reported that the global speculative-grade default rate is at its lowest level in 12 years.

The global default rate remained extremely low last quarter, finishing the second quarter at 1.4%, down a notch from 1.5% at the end of the first quarter. It is now at its lowest level since March 1995.

The default rate began the year at 1.7% and was at 1.8% a year ago, says Moody’s. Looking ahead, Moody’s forecasting model for the issuer-weighted speculative default rate shows the global rate rising to 1.9% by the end of the year, and increasing further to 3.3% by the end of the second quarter of 2008.

“Tentative signs of moderation in the risk appetite for leveraged credit, as signaled by increases in credit spreads and a more discriminating new issue market, certainly have not yet had any impact on corporate default rates,” says Kenneth Emery, Moody’s director of corporate default research.

Five Moody’s-rated issuers defaulted during the second quarter, one in April, four in May, and none in June. The total amount of debt they defaulted on was US$1.8 billion, compared to US$1.4 billion by three defaulted issuers during the first quarter. The US$3.2 billion total for the first half of the year is less than the US$3.5 billion 13 issuers defaulted on in the first half of 2006.

Measured on a dollar volume basis, Moody’s global speculative-grade bond default rate was 1.1% at the end of the second quarter, slightly up from the 1.0% at the end of the first quarter. The current dollar-weighted global bond default rate is much lower than the 4% level it stood at a year ago.