The global speculative-grade default rate declined in the first quarter and is expected to keep receding throughout the year, according Moody’s Investors Service.
The rating agency said Wednesday that the 12-month rate finished the first quarter at 9.9%, down from 13.0% at the end of 2009. Although it is still up notably from a year ago, when the global default rate stood at 7.8%.
Moody’s default rate forecasting model now predicts that the global speculative-grade default rate will fall to 2.8% by the end of this year and edge lower to 2.4% a year from now. For the coming year, default rates are expected to be highest in the consumer transportation sector in the U.S. and the business service sector in Europe.
“Defaults in 2010 will remain few and far between as long as the high yield debt markets remain wide open for business and the global economic recovery is maintained. The trailing 12-month default rate will also be under continued downward pressure as a result of the large number of defaults that occurred in the first half of 2009 moving out of the 12-month window,” said Moody’s director of default research, Kenneth Emery.
Overall, a total of 16 Moody’s-rated corporate debt issuers defaulted so far this year (including three from Canada and 12 in the US). In the first quarter of 2009, 90 companies defaulted.
Measured on a dollar volume basis, the global speculative-grade bond default rate closed at 10.3% in the first quarter, down from the 16.4% level from the previous quarter. Last year, the global dollar-weighted default rate was at 10.7%.
IE