Thanks to stronger liquidity, Moody’s Investors Service is forecasting that the default rate for speculative grade securities in Canada will decline this year.
The rating agency is predicting that the speculative grade default rate will fall to 2.0% by the end of 2020, down from 4.0% at the end of 2019.
Moody’s also said that it expects the default rate for Canadian firms to remain lower than for U.S. companies, and that their credit ratings will also remain stronger.
“Overall, we expect the current credit cycle will remain supported by continued investor demand, relatively low interest rates and a slowing, but still growing North American economy,” said Ed Sustar, senior vice president at Moody’s, in a statement.
The firm also reported that credit ratings for speculative grade companies in Canada has been declining “as more lower-rated issuers have entered the market, and as rating downgrades outpaced upgrades.”
However, liquidity at Canadian speculative-grade, non-financial firms has generally improved, Moody’s said.
Additionally, the rating agency said that it expects Canadian high-yield debt issuance to remain flat in 2020, at about $40 billion.
“This reflects companies’ modest refinancing needs and continued, albeit slower, Canadian and U.S. economic growth,” Moody’s said.