Moody’s global junk default rate declines to 2.1% in third quarter

By Caroline Salls

Pittsburgh, Oct. 15 – Moody’s Investors Service’s trailing 12-month global speculative-grade default rate finished the third quarter of 2014 at 2.1%, down from 2.2% in the second quarter, Moody’s said in its latest monthly default report.

The agency said the latest reading came in somewhat below its year-ago forecast of 2.7%.

In the United States, the speculative-grade default rate decreased to 1.7% in the third quarter from 1.9% in the second. In Europe, the default rate fell to 2% from 2.2% during the same period.

Moody’s said it now expects the global speculative-grade default rate to finish this year at 2.3%. By region, the ratings agency expects the default rate to rise to 2.3% in the United States and fall to 1.5% in Europe.

“With some indications of strengthening economic growth, we continue to expect few corporate defaults over the next 12 months,” Moody’s Albert Metz said in the release.

A total of 43 Moody’s-rated corporate debt issuers have defaulted in 2014 to date, with six of these in September.

Moody’s said 18 companies defaulted in the third quarter. Of those, six were from Europe, five each were from North America and Latin America, and the other two were from Africa and Asia Pacific.

By dollar volume, the global speculative-grade bond default rate ended the third quarter at 1.8%, down from 1.9% in the previous quarter.

In the United States, the dollar-weighted speculative-grade bond default rate ended the third quarter at 1.9%, compared with 2.0% in the second quarter. In Europe, the rate fell to 1.5% in the third quarter from 1.7% in the previous quarter.

Across industries, Moody’s said it expects default rates to be highest in the consumer services sector in the United States and the aerospace and defense sector in Europe in the next 12 months.

In the leveraged loan market, only two Moody’s-rated loan defaults were recorded in the third quarter, both outside of the United States. Moody’s said the U.S. leveraged loan default rate ended the third quarter at 0.9%, down from 1.7% in the second quarter.

© 2015 Prospect News.
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