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Defaults and Returns in the High-Yield Bond and Distressed Debt Market: Review and Outlook

Chapter

Abstract

High-yield bond default rates on US, Canadian and Mexican high-yield bonds decreased slightly in 2013 and remained well below historical averages. The rate decreased from 1.62% at year-end 2012 to 1.04% for all of 2013. Defaults include straight corporate bonds whose firms went bankrupt, missed an interest payment and did not cure it within the grace or forbearance period, or completed a distressed exchange. The 2013 rate is based on a mid-year market size of $1.39 trillion, up by a sizeable $180 billion from a year earlier. In all, $14.5 billion of defaults were recorded in 2013 (Table 8.1). The historical weighted-average annual default rate is 3.61% over the 43-year period (1971–2013). This weighted-average rate is down compared to 3.82% at the end of 2012. Our weights are based on the par value of high-yield bonds outstanding in each year. The arithmetic annual average default rate dropped to 3.14% from 3.19% one year earlier.

Keywords

Hedge Fund Credit Default Swap Default Probability Corporate Bond Default Rate 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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References

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Copyright information

© Edward I. Altman and Brenda J. Kuehne 2014

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