Defaults to peak in Q4

Defaults of speculative grade entities will peak in the fourth quarter in Europe and the US, says Moody’s.

The rating agency predicts the default rate for European speculative grade debt will rise from 9.3% in the third quarter to a peak of 10.9% in the fourth quarter, before dropping to 6% by the third quarter of 2010.

In the US, default rates for speculative grade issuers will hit a peak of 13.5% in the fourth quarter, up from 12.9% in the third quarter. By the third quarter of 2010, the default rate will fall to 4.4%.

A similar trend will occur on a global scale, Moody’s predicts. The number of global junk defaults will hit 12.5% in the fourth quarter, rising from 12% in the third quarter and then falling to 4.5% by the third quarter of 2010.