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Moody's trailing 12-month global speculative-grade default rate finished at 2.7% in October, up from 2.6% in September. The latest reading came in slightly above the rating agency's year-ago prediction of 2.4%.
"The energy sector remains the most troubled, accounting for almost a quarter of the 79 defaults so far this year," said Sharon Ou, Vice President and Senior Credit Officer of Moody's Credit Policy Research. "The most recent energy defaults include EXCO Resources Inc. and Warren Resources Inc., both of which completed distressed exchanges in October."
Among US speculative-grade issuers, the default rate rose to 2.8% in October from 2.7% in September. In Europe, the comparable rate increased to 2.4% from 2.1%.
Moody's default rate forecasting model now predicts that the global default rate will end 2015 at 3.0% before rising gradually to 3.4% by October 2016. Moody's expects default rates to be highest in the Metals& Mining sector in the US, followed by Oil & Gas.
"The credit market has seen some volatility recently, reflecting investors' concerns about the impact of a potential Fed interest rate hike on the global economy in addition to ongoing commodity price deflation," added Ou. If realized, the rate will nevertheless remain below the historical average of 4.2%, given the general stable credit trends and moderate refinancing risk among Moody's-rated speculative-grade issuers.
Moody's Monthly Default Report includes speculative-grade default statistics by region and industry, as well as year-ago rates and year-ahead forecasts. It also provides recent rating transition data and default rates among Moody's-rated loan issuers.
