Credit Market Research

Upgrades outpaced downgrades by one last week, continuing the trend of net positive rating activity for the eighth week. Financial institutions led upgrades with four. We also upgraded two Indian airports last week, one of which--GMR Hyderabad International Airport Ltd.--became this year's 21st rising star.

Seven of the eight downgrades were on U.S. corporates last week. We also lowered our long-term foreign currency rating on Mozambique to 'CCC' from 'CCC+' on a rising likelihood of a restructuring of outstanding debt.

Defaults increased to five last week, the highest weekly count since July. Three defaults were due to distressed exchanges, across different corporate sectors and regions. This brings the year-to-date total to 82, compared with 89 at the same point last year.

Positive rating momentum continued to build in August as upgrades outpaced downgrades for a third consecutive month, the longest such streak of 2026. Investment-grade issuers accounted for 42% of all upgrades in August, the second-highest share this year, indicating that rating improvements extended across the rating spectrum.

Against this backdrop, net bias improved to -3.4%, its strongest reading since August 2022. The recovery remained broad-based, driven by rising positive bias, falling negative bias, and notable improvements in the sovereign, aerospace and defense, and financial institutions sectors.

Global defaults remained elevated in August but below both last year and historical averages. At the same time, the U.S. share of defaults reached its highest level since 2020, while missed-payment defaults gained ground relative to distressed exchanges, pointing to increasing liquidity pressures among some of the weakest issuers.

Structured finance rating pressure eased considerably in August as downgrades fell by more than two-thirds from July. However, weakness remained firmly concentrated in CMBS, which recorded no upgrades for a fifth consecutive month and maintained a 100% downgrade ratio.