Credit Market Research

The number of rating actions declined last week, with rating activity net positive. Downgrades dropped to three, including one new risky credit (issuers in the ‘CCC’ rating category)—independent exploration and production company Canacol Energy Ltd.

There were no defaults last week. The year-to-date total (27) is materially below this point last year (47).

Credit pricing deteriorated last week, with corporate spreads widening across investment and speculative grades, leading the U.S. distress ratio to climb to 7.7%. In addition, the credit VIX spiked to its highest level since its inception in 2023.

Rating activity continued its positive trend despite market volatility. Upgrades (39) outnumbered downgrades (28) for the second consecutive month.

Weakest links dropped by 10 in February--reaching the lowest level since October 2022. The number of defaults as the reason for removals from the weakest links list remains limited, accounting for less than 30% in February.

Despite February recording the first fallen angels of the year, rising stars continued to outnumber fallen angels. However, potential rising stars declined, for the second month in a row, to 19.

The default count eased in February to seven, driven by a decline in the U.S. Meanwhile, monthly defaults in Europe outnumbered the U.S. for the first time since September 2022.