Moody's: Global speculative grade defaults expected to finish 2017 at 2.8%

Moody's Investors Service predicts that the global speculative-grade default rate will finish 2017 at 2.8% and then extend its slide to 1.8% a year from now.

"This favorable default outlook comes out of the backdrop of a growing economy, the continued recovery in the energy sector, and a strong credit market, which continues to provide sufficient liquidity for spec-grade companies," observed Sharon Ou, a Moody's Vice President -- Senior Credit Officer.

In the US, Moody's forecasts the speculative-grade default rate to fall to 3.2% at yearend from its current level of 3.4%. A further decline is anticipated by the rating agency to 2.3% by the end of November 2018. In Europe, the default rate is expected to finish at 2.3% in December 2017, before sliding to 1.1% twelve months from now.

 

From a sector perspective, analysts expect the highest default rate in the Media: Advertising, Printing & Publishing sector in both the US and Europe, followed by Retail and Cargo Transportation in the US and Europe, respectively.

Contrary to the falling speculative-grade default rates forecast for US and Europe, Moody's global speculative-grade default rate ticked up from the prior month, closing at 3.0% for the trailing 12-month period ending November 2017, up from 2.8%. Comparatively, the global default rate stood at 4.7% a year ago.

The number of loan defaults edged higher in November, with seven Moody's-rated issuers defaulting in the leveraged-loan market for the month, compared to four in October. The trailing 12-month US leveraged loan default rate rose to 2.0% in November from 1.7% in the prior month. At this time last year, the loan default rate was noticeably higher at 3.3%.

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