Moody's global junk default rate down to 9.9% in first quarter

By Caroline Salls

Pittsburgh, April 7 - Moody's Investors Service's trailing 12-month global speculative-grade default rate finished the first quarter at 9.9%, down considerably from 13% at the end of 2009, according to a news release.

A year ago, Moody's global rate stood at 7.8%.

The ratings agency said it now predicts that the global default rate will fall to 2.8% at the end of this year and edge lower to 2.4% a year from now.

"Defaults in 2010 will remain few and far between as long as the high-yield debt markets remain wide open for business and the global economic recovery is maintained," Moody's Kenneth Emery said in the release.

"The trailing 12-month default rate will also be under continued downward pressure as a result of the large number of defaults that occurred in the first half of 2009 moving out of the 12-month window."

According to the release, the European speculative-grade default rate fell to 7.3% in the first quarter of 2010 from 11.6% in the fourth quarter of 2009.

At this time last year, the European default rate stood at 5.3%.

Among U.S. speculative-grade issuers, Moody's foresees the default rate falling to 3.1% by December 2010, and for European speculative-grade issuers, Moody's projects that the speculative-grade default rate will decline to 1.4% by the end of this year.

Measured on a dollar-volume basis, the U.S. dollar-weighted speculative-grade bond default rate ended the first quarter at 11.3%, compared to 16.6% in the previous quarter.

The European dollar-volume rate fell to 5.8% in the first quarter from 13.7% in the fourth quarter of 2009.

In the leveraged loan market, a total of 10 Moody's-rated loan defaulters were recorded in the first quarter, all by North American issuers, including eight from the United States and two from Canada.

Across industries over the coming year, the agency said default rates are expected to be highest in the consumer transportation sector in the United States and the business service sector in Europe.

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