The credit crisis continued to erode U.S. corporate credit quality in the second quarter, says Fitch Ratings in a new report.

The par value of U.S. corporate bond downgrades in the quarter totaled US$115.4 billion. The total value of bonds affected by downgrades over the past year is now US$423 billion, which represents more than the previous two years combined.

Downgrades due to troubles in the U.S. financial sector declined in the second quarter, Fitch says. But credit erosion picked up momentum on the industrial side, it notes, as high energy costs and lackluster consumer spending continued to affect profitability in certain sectors.

New issue volume was exceptionally strong in the second quarter, totaling US$275.5 billion. Investment grade financials contributed US$150.4 billion of new issue volume, up from US$106.4 billion in the first quarter. Investment-grade industrial issuance rose to US$91.7 billion from US$63.6 billion in the first quarter. And, the speculative-grade sector saw issuance rebound to US$33.3 billion from just US$9.5 billion in the first quarter.

“The ability of the corporate bond market to satisfy refinancing and other capital needs will continue to be critical this year as other pockets of the debt markets such as syndicated loans and structured finance continue to languish,” says Mariarosa Verde, managing director of Fitch Credit Market Research.