Moody’s Investors Service’s speculative-grade corporate default rate declined to its lowest level in a decade in March, the firm reported today.

At the end of the first quarter, the global issuer-weighted trailing 12-month default rate reached 1.4%, down from 1.6% at the beginning of this year — its lowest level since April 1997, Moody’s said.

Moody’s forecasting model predicts that the global speculative-grade default rate will increase modestly to 2.7% by the end of 2007 and rise further to 3.5% a year from now.

“Moody’s model suggests a relatively benign default environment over the next year with default rates continuing to come in below their long-run average of 5.1%,” said Moody’s director of corporate default research, Kenneth Emery.

“Factors likely to push default rates modestly higher during the next year include slower growth of the U.S. economy and seasoning effects from relatively low-rated debt that was issued during the past several years,” emery added.

No Moody’s-rated bond or loan issuers defaulted in March, the second month in a row without such a default. Although there were no Moody’s-rated defaults in March, Moody’s noted that there were several unrated defaults including New Century Financial Corp., the United States’ second-largest subprime mortgage lender. Additionally, several Moody’s-rated issuers appear likely to default in the next several months, because they have either proposed distressed debt exchanges to their debt holders or they have missed interest payments (though remain in their grace periods), it said.

During the first quarter of 2007, both default counts and volume dropped significantly compared with the last quarter of 2006. There were only three defaults in the first quarter of 2007, compared to 10 defaults in the fourth quarter of 2006. As for default volume, only $1.4 billion in bonds defaulted in the first quarter of 2007, relative to a total of $2.5 billion in bonds and $0.9 billion in loans that defaulted in the final quarter of 2006.

The leveraged loan market recorded no defaults in the first quarter of 2007. In the previous quarter, there were two loan defaults.

Moody’s issuer-weighted loan default rate finished at 0.4% for the 12-month period ending the first quarter of 2007, down from 0.6% ending the fourth quarter of 2006.