The trailing 12-month global speculative-grade default rate finished at 3.1% in the fourth quarter of 2010, reports Moody’s Investors Service.

The rate is down from 4.0% in the previous quarter, and down sharply from 13.1% in the fourth quarter of 2009. A total of 19 Moody’s-rated corporate debt issuers defaulted in the fourth quarter of 2010, pushing the total for the year to 59, which is down from 269 defaults in 2009.

“The story of 2010 is how few defaults were actually recorded,” said Albert Metz, managing director of credit policy research. “Our baseline expectations call for continued stability in 2011. But that baseline assumes that additional significant sovereign and financial sector problems do not develop in Europe.”

The ratings agency’s default rate forecasting model now predicts that the global speculative-grade default rate will fall to 1.9% in 2011 under its baseline scenario. In a pessimistic scenario, which assumes a liquidity freeze and further economic contractions, the global default rate could finish at 6.1%, while in an optimistic scenario, the rate could dip even further to 1.2%, it says.

In 2010, the largest number of defaults came from the media sector with six companies defaulting, followed by the capital equipment sector, the hotel, gaming, & leisure sector, and the retail sector, which each had five defaults. For the coming year, default rates are expected to be highest in the consumer transportation sector in the U.S. and the media sector in Europe.

Moody’s speculative-grade corporate distress index — which measures the percentage of rated issuers that have debt trading at distressed levels — came in at 10.5% at the end of the fourth quarter, down from 15.0% in the previous quarter, and 22.7% a year ago.

IE