Corporate liquidity remains robust amid continued economic growth, according to a report published by Moody’s Investors Service on Tuesday.
Moody’s liquidity-stress index (LSI), which falls when corporate liquidity appears to improve and rises when it weakens, declined to 4.9% in April from 5.3% in March, the report says.
The index dipped to its lowest level last month since July 2015, “with liquidity conditions remaining fundamentally supportive for issuers across the speculative-grade rating spectrum,” the report adds.
Moody’s is forecasting that the U.S. speculative-grade default rate will decline to 3.0% over the coming 12 months, from 4.7% today.
“Speculative-grade liquidity continues to keep defaults in check, with a growing economy boosting profits and a lack of meaningful maturity and covenant concerns over the next year,” says John Puchalla, senior vice president at Moody’s, in a statement. “Speculative-grade bond and loan issuance slowed in April, but remained at levels healthy enough to give most companies the flexibility to resolve liquidity issues.”
Last month, upgrades of speculative-grade liquidity ratings also continued to outnumber downgrades by a ratio of nine to four, Puchalla adds.