The global speculative-grade default rate continued to retreat in the second quarter, sliding to 6.1% from 10.0% in the previous quarter, Moody’s Investors Service said Thursday.

A year ago, the global default rate stood at 11.1%, and Moody’s default rate forecasting model now predicts that it will fall to 2.4% by the end of this year before declining to 1.8% by the second quarter of 2011.

“Given the indicators in the market, we expect the decline in default rates to continue through the end of this year. However, uncertainty is elevated as Europe continues to address sovereign debt issues that could impact the debt market,” said Albert Metz, Moody’s director of credit policy research.

A total of 26 Moody’s-rated corporate debt issuers have defaulted so far this year, of which nine were recorded in the second quarter. In comparison, there were 85 defaults in the second quarter of last year.

Default rates are expected to be highest in the business service sector in the U.S., and the durable consumer goods sector in Europe this year.

Moody’s speculative-grade corporate distress index, which measures the percentage of rated issuers that have debt trading at distressed levels, came in at 17.1% at the end of the second quarter, unchanged from the previous quarter. A year ago, the index was at 40.4%, Moody’s noted.

IE