UPDATE 1-Global junk bond default rate at decade low-Moody's

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NEW YORK, April 9 (Reuters) - The global junk bond default rate fell to a decade low of 1.4 percent in the first quarter, down from 1.6 percent at the beginning of the year, Moody's Investors Service said on Monday.

A weaker economy and record issuance of very low-rated debt are expected to drive defaults modestly higher, however, Moody's said in a statement. The global default rate is expected to rise to 2.7 percent by the end of 2007 and to 3.5 percent a year from now, Moody's said.

The long-term average is about 5.1 percent.

The U.S. default rate also ended the quarter at 1.4 percent, its lowest level in 25 years and down from 1.7 percent a year earlier, Moody's said.

Only $1.4 billion in bonds worldwide defaulted in the first quarter, down from $2.5 billion in the last quarter of 2006, Moody's said.

March was the second straight month with no defaults on corporate bonds or loans rated by Moody's, the rating agency said. Several unrated issuers defaulted, however, including subprime mortgage lender New Century Financial Corp.NEWC.PK. New Century filed for bankruptcy protection on April 2 amid a surge in homeowner mortgage defaults.