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Corporate credit quality deteriorated in the first quarter as rating downgrades continued to outpace upgrades among North American companies, according to Fitch Ratings.

In a report, the rating agency said the overall downgrade-to-upgrade ratio for North American corporates came in at 1.4:1 for the first three months of 2024, marking the seventh straight quarter of downgrades outnumbering upgrades.

Additionally, the mix of rating outlooks remains tilted slightly to the downside. Fitch said 11% of its rating outlooks are negative, while 9% are positive and 80% are stable.

The rating agency said it expects 17% of issuers to have leverage metrics that exceed its triggers for a rating downgrade by the end of 2024 — highlighting the risk of potential future downgrade activity.

The downgrade activity has remained concentrated among speculative-grade issuers, the report noted.

For so-called “junk” rated issuers, the downgrade-to-upgrade ratio came in at 1.7:1 in the first quarter, whereas upgrades outpaced downgrades for investment-grade issuers, Fitch said.

Despite these negative trends, the agency said the number of speculative-grade issuers that climbed up into investment-grade territory in the first quarter outpaced the number of firms that slipped to junk status.