Moody’s: Spec-Grade Liquidity Worsens
July 21, 2010
Speculative-grade liquidity has worsened this summer for the first time in 15 months, according to a report published Wednesday by Moody’s Investors Service.
The liquidity stress index rose to 5.5% in mid-July from 5% in June and 4.8% in May, after 15 months of declines.
“The increase in the past six weeks suggests that a long period of improving liquidity for spec-grade companies may be drawing to a close amid a tentative U.S. recovery, high unemployment and persistent concerns over sovereign debt in Europe,” John Puchalla, a Moody’s vice president and senior credit officer, said in a statement.
The rating agency said that the increase in the stress index could be a warning that speculative-grade corporate liquidity remains dependent on continued access to credit markets, and billions of dollars of high yield debt maturing over the next several years could put pressure on default rates if the economy remains volatile and credit markets are unwelcoming.
Moody’s said that U.S. speculative-rated companies have about $800 billion in loans and bonds maturing between now and 2014.
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