Liquidity-Stress Indicator Remains Low, Despite Rising in January

Despite economic growth and healthy credit markets in the U.S., the January 2018 results from Moody’s Investors Service’s Liquidity-Stress Indicator (LSI) show a potentially weakened corporate liquidity after increasing for the first time in a year.

The indicator, which generally falls when corporate liquidity improves and rises when it weakens, recorded a 0.2% increase from December 2017 to January 2018. The LSI’s last increase was in January 2017, Moody’s reported, while hitting an all-time low of 2.5% this past December.

“We expect the LSI to inch higher this year amid monetary tightening, tax law changes affecting interest deductibility and less room for improvement in commodity liquidity,” Moody's Senior Vice President. John Puchalla said in a press release on Feb. 2. “Nevertheless, good speculative-grade liquidity (SGL) should keep a lid on defaults, with the U.S. spec-grade default rate also forecast to decline.”

Moody’s SGL ratings saw four downgrades, including two energy companies, an oil services provider as well as an electric production firm, Puchalla said in the report. Three upgrades were also recorded.

—Andrew Michaels, editorial associate

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