Moody's: Global speculative-grade default ticks lower in November; commodities firms account for half the month's defaults

Moody's global speculative-grade default rate closed at 4.6% for the trailing 12-month period ended 30 November, slightly lower from October's 4.7%, the rating agency says in its latest global default report. Commodity sectors continue to generate the majority of defaults, accounting for two of the four defaults among Moody's-rated companies last month, even as commodities prices increased.

"Notably, even though the number of defaults, at 129, this year by Moody's-rated corporate issuers have been the highest since 2009, default counts have fallen to single digits in recent months compared with double digits during February-July," said Sharon Ou, a Moody's Vice President and Senior Credit Officer. "In November, we recorded the lowest monthly defaults count -- a total of four -- since 2014."

The US speculative-grade default rate finished November at 5.6%, unchanged from October, Ou says, with North American issuers accounting for the majority of defaults, at 91 in the US and seven in Canada. Outside North America, defaults were highest in Europe, at 15, where the speculative-grade default rate held steady at 2.4% from October to November. Moody's expects the global speculative-grade default rate to end 2016 at 4.3% before falling below its historical average -- currently at 4.2% - to 3.2% by November 2017.

"Despite some volatility, the credit market remains open for high yield companies to manage refinancing needs. Within a baseline scenario of tighter high yield spreads, our model predicts a benign default outlook in the coming year with fewer new energy sector woes," Ou added.

Moody's cautions that even as commodity sector defaults have declined recently, the firm still expects default risk to remain higher in certain sectors in 2017. Moody's forecasts that the default rate will be highest in Metals & Mining (6.3%) in the US, followed by Energy: Electricity (6.1%), FIRE: Finance (4.8%) and Oil & Gas (4.8%). By contrast, Moody's model predicts that Media: Advertising, Printing & Publishing and Oil & Gas will be the most troubled sectors in Europe.