OREANDA-NEWS. The Fitch Fundamentals Index (FFI) remained in neutral territory during second quarter 2015 (2Q15) as an uptick in mortgage performance and transportation trends offset pressure from corporate defaults, lower high yield recoveries and lower EBITDA forecasts, says Fitch Ratings.

The FFI's corporate default rate component score fell to -5 in 2Q15 from neutral in 1Q15.

'The elevated default rate, while still far short of the crisis-level peak, is directionally important, especially in the hard-hit energy and mining sectors, where significant operating pressure persists," says Bill Warlick, Fitch Ratings Senior Director.' Generally weak global economic fundamentals and the prospect of a Fed rate rise are likely to keep high yield credit in the spotlight through the second half of the year.'

High yield energy bond prices have collapsed under the pressure of low oil prices, with 16.5% of U.S. high-yield energy bonds trading below 80 cents on the dollar as of June 30, 2015. This compares to 0.1% from the same date a year earlier.

Operating conditions in the coal industry remain difficult given soft global growth, a slowdown in China, and cheap natural gas. Seven metals and mining companies defaulted during 1H15.

Fitch believes the energy default rate is unlikely to exceed 6%-7%, in part due to the reopening of capital markets to high yield energy companies in 1Q15. Better access to capital through second-lien and other secured lending, equity raises, and injections from energy-related funds have helped stave off further defaults for U.S. shale producers.

Transportation trends and mortgage performance were two bright spots in the 2Q15 index. Modest U.S. housing price gains and gradual labor market improvements contributed to a drop in prime mortgage delinquency rates. Year-over-year transportation volumes increased by more than 4%, as port volumes recovered following the West Coast labor dispute. Toll road and air traffic also increased by 5% and 3%, respectively.

Stability in the aggregate 2Q15 FFI score from the prior quarter reflects steady credit conditions across multiple asset classes. The results suggest that low interest rates and modest economic growth will help perpetuate the relatively benign credit environment, with broadly stable credit conditions across the U.S. economy.

U.S. Fitch Fundamentals Index

The Fitch Fundamentals Index (FFI) tracks changes in credit fundamentals across key sectors of the U.S. economy. Analyzing the relative strength or weakness of the index or its sub components can provide insight into how conducive conditions in the U.S. are for economic growth.

The trend in potential drivers or constraints on economic growth or decline is indicated by the relative strength or weakness of the FFI, ranging from +10 to -10. The FFI's components include mortgage and credit card performance, corporate defaults, high-yield recoveries, rating actions and Outlooks, EBITDA and CapEx forecasts, Banking System Indicator, the CDS outlook, and transportation trends. Released quarterly, the FFI relies primarily on proprietary Fitch-sourced data.

To learn more about the FFI, please visit 'www.thewhyforum.com/ffi'.

Fitch Ratings
Fitch Ratings is a leading provider of credit ratings, commentary and research. Dedicated to providing value beyond the rating through independent and prospective credit opinions, Fitch Ratings offers global perspectives shaped by strong local market knowledge and deep credit market experience. The additional context, perspective and insights we provide help investors to make important credit judgments with confidence. For more information, visit 'www.fitchratings.com'.

Fitch Group is a global leader in financial information services with operations in more than 30 countries. In addition to Fitch Ratings, the group includes Fitch Solutions, an industry-leading provider of credit risk products and services, and Fitch Learning, a preeminent training and professional development firm. Fitch Group is jointly owned by Paris-based Fimalac, S.A. and New York-based Hearst Corporation.