The global default rate for speculative-grade securities ticked down in the third quarter, Moody’s Investors Service reports.
In its latest monthly default report, the rating agency says that the trailing 12-month global speculative default rate finished the third quarter at 2.1%, down from 2.2% in the second quarter; and, well below its year-ago forecast of 2.7%. Based on its forecasting model, Moody’s now expects the global speculative-grade default rate to finish this year at 2.3%.
“The corporate default rate remains quite low, coming in below what were optimistic projections a year ago,” says Albert Metz, managing director of credit policy research at Moody’s. “With some indications of strengthening economic growth, we continue to expect few corporate defaults over the next 12 months.”
Moody’s says that a total of 43 corporate debt issuers that it rates have defaulted so far in 2014; and, six of those came in September. Eighteen companies defaulted in the third quarter, including six from Europe, five from North America, five from Latin America, with the remainder from Africa and Asia Pacific.
The speculative-grade default rate decreased to 1.7% in the third quarter in the U.S., down from 1.9% in the second quarter. In Europe, the default rate fell to 2.0% from 2.2% during the same period. Moody’s is now forecasting the default rate to rise to 2.3% in the U.S. and fall to 1.5% in Europe by the end of the year.
For the next 12 months, Moody’s expects default rates to be highest in the consumer services sector in the U.S. and in the aerospace & defense sector in Europe.
Moody’s also reports that its global distressed index, which measures the percentage of high-yield issuers whose debt is trading at distressed levels, jumped to 8.3% in the third quarter from 6.5% in the second. At this time last year, the index stood at 8.6%.