Moody’s Investors Service reported Thursday that the global speculative-grade default rate dropped slightly to 1.9% in May, its lowest level since July 1997, from 2% in April.

Moody’s predicts that the global default rate will rise to 2.1% by the end of this year and to 3% by the end of May 2006.

For the year to date, the default rate has dropped by one sixth, from a level of 2.3% recorded in January. A year ago, the default rate stood at 3.6%. So far in 2005, 11 issuers have defaulted on a total of US$2.9 billion of bonds. Among the 2005 defaults, eight came from U.S.-based companies, two were from Sweden, and one from Brazil. When measured by default amount, U.S.-based defaults accounted for 84% of total defaulted bonds so far this year.

Among U.S.-based issuers, the speculative-grade default rate fell to 2.2% in May from 2.3% in April. The U.S. rate was down from 2.8% in January and down from 4% in May 2004. The European default rate remained at 1.7% in May, unchanged from April, but is up from 1.3% at the beginning of 2005 and 1.4% recorded a year ago.