Moody’s Investors Service said on Wednesday that its 12-month global speculative-grade default rate continues to fall, slipping from 5.5% in July to 5.0% in August.

The ratings agency’s default rate forecasting model now predicts that the global speculative-grade default rate will fall to 2.7% by the end of this year, and then continue lower, reaching 2.0% a year from now. A year ago, the rate stood at 12.3%.

“Defaults continue, but at a very slow pace,” said Albert Metz, Moody’s director of credit policy research. “Following the apparent stability in the pricing of high yield corporate debt, we expect to see reduced defaults going forward as well.”

Four Moody’s-rated corporate debt issuers defaulted in August, all of them based in the U.S. And, year-to-date, a total of 38 issuers have defaulted, compared to 214 defaults for the same period last year. Of the 38 defaulters in 2010, 30 are from North America (U.S. and Canada) and five are from Europe.

By sector, default rates are expected to be highest in the consumer transportation sector in the U.S., and in the durable consumer goods sector in Europe over the coming year.

Moody’s speculative-grade corporate distress index — which measures the percentage of rated issuers that have debt trading at distressed levels — closed at 15.3% in August, down slightly from 15.6% in July. A year ago, the index stood at 34.0%.

IE