Global Speculative-Grade Default Rate Falls to Lowest Level in Nearly Two Years

In August, the global speculative-grade default rate fell below 3% for the first time since October 2015, according to a new report from Moody’s Investors Service. The rate fell 0.2% from its 3.1% level in July. The ratings agency anticipates that the rate will reach 2.3% in August 2018, down from a high of 4.8% two years previously, when commodity sectors drove the default rate to its highest level in seven years.

“This benign forecast is a function of a relatively low level of high-yield spread and stability in commodity prices,” said Moody’s Vice President and Credit Officer Sharon Ou.

Two speculative-grade companies defaulted last month: a U.S. retailer that completed a distressed exchange and a Singapore-based semiconductor assembly and test services provider that failed to make coupon payments, Moody’s said. The most vulnerable industries include media advertising, printing and publishing, durable consumer goods and retail.

For the United States alone, the speculative-grade default rate declined to 3.4% in August from 3.6% in July. In Europe, the rate fell to 2.6% from 2.8%.

– Adam Fusco, associate editor

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