The default rate for global speculative-grade securities headed higher once again in October, driven by ongoing trouble in resource sectors, Moody’s Investors Service announced on Wednesday.
Moody’s global speculative-grade default rate came in at 4.7% for the 12-month period ended Oct. 31, which was up from 4.5% in September, the company said in a news release.
Commodity sectors continue to generate the most defaults, accounting for four of the eight defaults among Moody’s-rated companies last month.
“Some 60% of the 124 defaults seen so far this year have occurred in the commodities sectors,” said Sharon Ou, vice president and senior credit officer at Moody’s. “North American companies accounted for 96 of these and European firms for 12, with the remainder occurring in Latin America, Asia Pacific and Africa.”
The U.S. default rate rose to 5.6% in October, up from 5.4%, Moody’s said, while in Europe, the rate slipped to 2.3% from 2.4%.
The rating agency forecasts that the global default rate will trend down, finishing the year at 4.3%. By October 2017, Moody’s expects the rate to fall to 3.3%.
“Factors driving our benign default outlook include an issuer-friendly market that has allowed companies to refinance as necessary, mitigating the risk of debt nonpayment,” Ou added. “In addition, default risk is expected to decline in the commodity sectors in 2017, with weaker companies having been weeded out and those that survive being relatively healthier.”