Corporates in the US are seeing a slow credit recovery as bond default rates have increased for the first time in a year, says Moody's, the ratings agency. August saw a rise in default rates to 6%, up from 5.8% in July.
Over 70 issuers, since January, have defaulted on $38 billion of debt. But despite the August increase, these figures compare favourably to corresponding figures for 2002, when 108 issuers defaulted on $120 billion in debt; a fall of almost 75%.
US corporates, according to Moody's, are the culprits. US-based issuers numbered seven out of August's eight defaults, and US default rate increased from 5.3% in July to 5.8% in August.
"The decline in the global default rate we've seen this year has been largely driven by a sharp fall in defaults outside the US, particularly in Europe," said David T. Hamilton, director of Moody's corporate bond default research. "Although US corporate credit quality is certainly improving, we're still in the early stages of a credit recovery. It's likely that the default rate for US issuers will finish the year just slightly below where it began."