Moody's: Liquidity-Stress Indicator remains at recent new low in November

Moody's Liquidity-Stress Indicator (LSI) was unchanged at 2.7% last month, the rating agency says in its most recent edition of SGL Monitor Flash. The indicator hit that nadir in October after surpassing its previous all-time low of 2.8%, recorded in April 2013.

Moody's Liquidity-Stress Indicator falls when corporate liquidity appears to improve and rises when it appears to weaken.

"US speculative-grade liquidity continues to be well supported by investors eager for yield," said John Puchalla, a Moody's Senior Vice President. "New high-yield bond issuance has remained healthy despite some deals being pulled due to investor pushback, with November issuance up $2 billion on the prior month."

Upgrades of Moody's speculative-grade liquidity (SGL) ratings came in even with downgrades in November, at six each, Puchalla says. Among the four downgrades to SGL-4, the lowest SGL rating, were stressed retailers Sears Holdings and Bon-Ton Stores. Eastman Kodak likewise was downgraded to SGL-4, its challenged print businesses suffering further declines. Among November's SGL rating upgrades were two energy companies, California Resources and Pioneer Energy, both of which were raised to SGL-3.

Meanwhile, a continued flattening in the LSI would signal that the US speculative-grade default rate will stabilize toward the end of 2018, Moody's says. For now, the indicator's decline over the past year supports the rating agency's forecast that the default rate will drop to 2.1% in October 2018 from 3.2% today.

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