The default rate for speculative securities ticked up in the first quarter of 2015 amid turmoil in the energy sector, Moody’s Investor Services reports.
The rating agency says that its trailing 12-month global speculative-grade default rate finished the first quarter of 2015 at 2.3%, up from 2.1% in the fourth quarter of 2014. Moody’s forecasting model now sees the rate rising to 2.6% by the end of the year, which would still be low by historical standards.
A total of 16 Moody’s-rated corporate debt issuers defaulted in the first quarter of 2015, including two energy firms. Of the 16 defaulters, 10 were from the U.S., three were from Europe, and the others were from Latin America.
“The stress in the energy sector has been reflected in a number of Moody’s metrics … but other sectors remain calm and the pace of corporate defaults remains low and steady,” says Albert Metz, managing director of Moody’s Credit Policy Research.
“Ample liquidity, together with a recovering U.S. economy, will likely contribute to a low default rate in the near future,” he adds.
By region, Moody’s expects the default rate to rise to 2.7% in the U.S. and 2.4% in Europe. The U.S. rate ended the first quarter at 1.9%, unchanged from the previous quarter. Whereas, in Europe, the default rate increased to 2.2% from 1.8%.
By sector, it sees the metals and mining sector having the highest default rate in the U.S. in the months ahead, and it says the aerospace and defense sector will be hardest hit in Europe in the next 12 months.