Moody’s global speculative-grade default rate ends quarter at 2.6%

By Caroline Salls

Pittsburgh, Oct. 10 – Moody’s Investors Service’s trailing 12-month third-quarter global speculative-grade default rate closed at 2.6%, the lowest level in three years, according to a global default report released Wednesday.

In comparison, Moody’s said the global default rate stood at 3.1% at the end of the second quarter. The agency expects the rate to finish 2018 at 2% before declining to 1.8% a year from now.

“Global economic growth, healthy corporate earnings and accommodative credit markets will continue to support a benign default outlook over the coming 12 months,” Moody’s Sharon Ou said in the release.

“However, gradually tightening monetary policy and trade tensions between the U.S. and China, alongside weaker credit quality, are likely to put upward pressure on the default rate over the longer term.”

Moody’s said it recorded 10 corporate defaults in the third quarter, down from 17 in the second quarter and 29 in the first.

The report said eight of the past quarter's defaults occurred in North America, with the remainder in Europe and Asia. By industry, the oil and gas, metal and mining and wholesale sectors each saw two defaults, while retail, the most troubled sector in the first quarter, saw only one in the third quarter.

Moody’s said the oil and gas and retail sectors have each accounted for 11 defaults this year and remain the biggest contributors of defaults.

In the United States, Moody’s said it expects the speculative-grade default rate to fall to 2.5% at the end of the year from 3.1% currently. In Europe, the agency said the rate will finish 2018 at 1.2% before rising to 2% a year from now.

Defaults are expected to be highest in the media: advertising, printing and publishing sector in the United States over the next year, followed by retail, while consumer services is expected to be the most troubled sector in Europe.

© 2015 Prospect News.
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