Moody's global speculative-grade default rate climbs to 2% in January

By Caroline Salls

Pittsburgh, Feb. 8 - Moody's Investors Service's trailing 12-month global speculative-grade default rate came in at 2.0% in January, up from 1.8% in December, according to Moody's monthly default report.

In the United States, the speculative-grade default rate ended January at 2.2%, up from December's 1.8% level, while in Europe the default rate ended January at 3.0%, unchanged from December.

This time last year, Moody's U.S. rate was 3.0% and its European rate was 2.3%.

Moody's said it expects the global speculative-grade default rate to rise to 2.7% by January 2013, well below the 5% historical average.

"Default rates remain low by historic standards, but they are increasing, particularly in Europe," Moody's Albert Metz said in the report.

"We expect more defaults in the coming months. But our baseline case remains that default rates will remain below their long-term average."

According to the report, seven corporate debt issuers defaulted in January, including six in the United States and one in Europe, compared to one default in January 2011.

Moody's said it expects default rates to be highest in the consumer services sector in the United States and the business services sector in Europe over the next 12 months.

By dollar volume, the ratings agency's global speculative-grade bond default rate fell to 1.5% in January from 1.8% in December.

In the United States, the dollar-weighted speculative-grade bond default rate edged to 1.2% in January from 1.1% in December 2011, and in Europe, the dollar-weighted speculative-grade bond rate opened the year at 2.7%, down from December's rate of 4.3%.

Moody's said the drop primarily resulted from Allied Irish Bank's move out of the trailing 12-month window.

The trailing 12-month U.S. leveraged loan default rate doubled to 1.2% in January from 0.6% in December 2011, Moody's reported.

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