Rating drift remains positive at the speculative grade level, but deteriorated at the investment grade level
A drop in rating upgrades meant the drift of global corporate credit ratings turned negative in the third quarter, Fitch Ratings says in a new report.
The rating agency says that ratings downgrades outpaced upgrades 1.4 to 1 in the quarter, versus 0.8 to 1 in the second quarter, and 0.6 to 1 in the first quarter. The negative turn was mostly a product of fewer upgrades rather than an increase in downgrades, it says.
In fact, downgrades posted a modest contraction quarter over quarter, affecting 2.7% of global corporate issuers down from 3.1% in the second quarter. However, upgrades dropped more sharply to 2% of ratings from 3.8% in the prior quarter, Fitch reports.
Fitch says that the rating drift remains positive at the speculative grade level, but has deteriorated at the investment grade level. The investment grade downgrade rate (2.8%) topped the upgrade rate (1.2%) in the third quarter, whereas the speculative grade downgrade rate (2.7%), trailed the upgrade rate (3.9%).
Also, developed markets downgrades outpaced upgrades 2.1 to 1, while emerging market downgrades lagged upgrades 0.4 to 1.
The share of global corporate issuers carrying a negative outlook remained steady quarter to quarter at 7%, while the share of issuers assigned a positive outlook rose to 8% from 7% in the previous quarter.