The global speculative-grade bond default rate edged up to 2.5% in February from 2.3% in January, possibly signaling a turning point in the direction of the default rate, reported Moody’s Investors Service.

“For several months now, Moody’s has been predicting that default rates would reach a cyclical low near the second quarter of this year,” said David Hamilton, Moody’s director of default research. “February’s rise may indicate that we are near the turning point. Our default forecasting model indicates that the default rate will gradually increase over the first half of this year, break higher in the last six months, and reach a 3.2% level by the end of February 2006.”

Despite the expected increase, Hamilton cautioned that the level of the default rate is likely to remain below its 4.9% historical annual average. “Even in a high-default scenario, with default counts running 50% higher than we are currently forecasting, the default rate still would not quite reach the 4.9% historical average,” he said.

Last month, five corporate issuers defaulted on bonds worth a total of US$1.2 billion. So far in 2005, nine issuers have defaulted on a total of $2.1 billion of bonds, with all but three defaulters based in the United States.

In the leveraged loan market, Moody’s issuer-weighted speculative-grade loan default rate remained unchanged in February at 1.4%.