Moody's Investors Service high-yield global speculative-grade default rate ended the third quarter at 1.5%, the fourth lowest level on record since 1985. Only May 1997, March 1995 and April 1995 were lower. The 1.5% rate fell from a second quarter rate of 1.8% and a 1.9% rate at the start of the year. Since May 2005, the default rate has stayed between 1.6-2.1%.
The ratings agency said that according to its forecasting model, the default rate may be at or near a low for this credit cycle. It anticipates the rate will remain virtually unchanged for the remainder of the year, but will rise to 2.6% by next September. A Morgan Stanley research report said the bank also anticipates high-yield default rates remaining fairly low into next year. "We find that the current macro environment and the liquidity profiles of high-yield balance sheets support a positive outlook on defaults over the next 12 months," MS analysts wrote in the report.
In the third quarter, five Moody's-rated corporate bond issuers defaulted. Last month's defaulters include Charter Communications and Premier Entertainment Biloxi. In the loan market, no Moody's-rated credits defaulted.