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The trailing 12-month global speculative-grade default rate finished the first quarter of 2015 at 2.3%, up from 2.1% in the fourth quarter of 2014, Moody's Investors Service says in its latest monthly default report. The latest reading came in close to the rating agency's year-ago forecast of 2.6%.
In the US, the speculative-grade default rate ended the first quarter at 1.9%, unchanged from the previous quarter. In Europe, the default rate increased to 2.2% from 1.8% during the same period. A year ago, the rate was 1.8% in the US and 2.7% in Europe.
Based on its forecasting model, Moody's now expects the global speculative-grade default rate to rise to a still-low 2.6% by the end of 2015. By region, Moody's expects the default rate to rise to 2.7% in the US and 2.4% in Europe.
"The stress in the energy sector has been reflected in a number of Moody's metrics such as the liquidity stress index, the B3 negative and lower corporates rating list and the distressed index, but other sectors remain calm and the pace of corporate defaults remains low and steady," says Albert Metz, Managing Director of Moody's Credit Policy Research. "Ample liquidity, together with a recovering US economy, will likely contribute to a low default rate in the near future," he adds.
A total of 16 Moody's-rated corporate debt issuers defaulted in the first quarter of 2015, including two energy firms -- Quicksilver Resources Inc. and Connacher Oil and Gas Ltd. Of the 16 defaulters, 10 were from the US, three were from Europe and the remainder were from Latin America.
By dollar volume, the global speculative-grade bond default rate ended the first quarter at 2.7%, up from 1.8% in the prior quarter and 0.9% a year ago.
In the US, the dollar-weighted speculative-grade bond default rate closed at 3.0% in the first quarter, up from 1.9% in the prior quarter. In Europe, the rate rose to 1.7% in the first quarter from 1.2% in the last quarter. At this time last year, the dollar-weighted bond default rate stood at 0.4% in the US and 2.5% in Europe.
Across industries, Moody's expects default rates to be highest in the metals and mining sector in the US and the aerospace and defense sector in Europe in the next 12 months.
Moody's global distressed index, which measures the percentage of high-yield issuers whose debt is trading at distressed levels, fell to 16.4% at the end of the first quarter from 18.1% in the previous quarter. At this time last year, the index was 7.1%.
In the leveraged loan market, a total of eight Moody's-rated issuers defaulted on loans in the first quarter. The US leveraged loan default rate rose slightly to 1.0% in the first quarter from 0.9% in the prior quarter. A year ago, the rate stood at 1.5%.
