The global default rate for speculative-grade debt increased 0.1 percentage point during the third quarter to 3 percent in September, the highest level in almost two years, according to Moody’s Investors Service.
The ratings company’s trailing 12-month global speculative-grade default rate increased from 2.9 percent in the second quarter and compares with 1.8 percent a year ago, New York-based Moody’s said today. The rate remains less than a historical average of 4.8 percent in data going back to 1983 and is the highest since 3.2 percent in December 2010.
U.S. junk-rated defaults increased to 3.5 percent in September from a 3.2 percent rate in the second quarter. In Europe, the pace of high-yield defaults fell to 2.6 percent last month from 2.8 percent in the second quarter, Moody’s said.
“The high-yield market has been healthy so far this year despite continued distress in Europe, slow recovery in the U.S. economy, and concerns over China’s growth rate,” Moody’s said in a report dated Oct. 5. “Spreads have come down recently along with continued favorable borrowing and liquidity conditions.”
High-yield global corporate defaults will end 2012 unchanged at 3 percent, before decreasing to 2.9 percent by September 2013, according to the report. In the U.S., the year-end rate is expected to be unchanged at 3.5 percent while decreasing to 2.4 percent in Europe.
The advertising, printing and publishing industries will lead defaults in the U.S. this year, while companies in the hotel, gaming and leisure businesses are the most likely to default in Europe, Moody’s said.
Nine companies defaulted in the third quarter, with seven in North America and two in Europe and Latin America, bringing the tally for the year to 46.
High-risk, high-yield bonds are rated below Baa3 by Moody’s and lower than BBB- by Standard & Poor’s.