The U.S. distress ratio rose to 7.2% as of Nov. 15 from 5.6% as of Oct. 15, hitting the highest level for this year and signaling increased chances of defaults and potential credit losses, analysts at S&P Global Ratings wrote in a new report.

Defined by S&P as the number of distressed credits divided by the total number of speculative-grade issues, the distress ratio measures the level of risk the market has priced into bonds.

"A rising distress ratio reflects an increased need for capital and is typically a precursor to more defaults when accompanied by a severe and sustained market disruption," said Diane Vazza, head of S&P Global Fixed Income Research.

As of Nov. 15, the retail and restaurants sector has the highest distress ratio at 19.5%, followed by telecommunications at 15.6%.

In November, the telecommunications sector accounted for the most distressed issues with 26, followed by oil and gas with 24.

Rising from 17 in October, the oil and gas sector posted the biggest increase in distressed issues last month following volatility in global crude oil prices.

According to S&P, the U.S. distress ratio has been relatively stable in 2018 until last month, averaging 5.7%.

The overall distress ratio peaked at the end of 2008 and bottomed out around mid-2011. However, the financial institutions sector's distress ratio rose sharply in September 2011 due to uncertainty over the European debt crisis.

In 2014, oil price declines affected the distress ratios of the oil and gas sectors and metals, mining, and steel industries.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.