A slight raise of the global default rate for speculative-grade debt in February signaled a possible turning point in the trend for credit quality, Moody’s Investors Service, the credit rating company, said.

The default rate increased to 2.5 per cent in February compared with 2.3 per cent in January after five issuers defaulted on a total of $1.2bn of bonds. So far this year, nine issuers, including six in the US, have defaulted on $2.1bn of bonds.

“For several months now, Moody’s has been predicting that default rates would reach a cyclical low near the second quarter of this year,” said David Hamilton, director of default research. “February’s rise may indicate that we are near to the turning point.”

Moody’s predicts the default rate to grow gradually during the first half of 2005 and then rise up to 3.2 per cent by the end of next February. But despite this expected increase, the rate would still be below its 4.9 per cent annual average.

The European default rate increased to 1.8 per cent in February compared with 0.6 per cent in January. In the US, the default rate rose to 3 per cent in February from 2.8 per cent.

In the leveraged loan market, Moody’s issuer-weighted speculative grade loan default rate was unchanged at 1.4 per cent in February.