Default Rates in the High-Yield Market

Abstract

The author draws comparisons among three studies of default rates in the high–yield markets. Using data through December 1998, they show how the different methodologies of the three studies can produce very different results. While default rates increased during 1998, they remain below historical averages, and spreads as of the end of 1998 more than adequately compensated investors for the likelihood of a recession. Default rates by security type, rating, industry, seniority, and size of issue are examined in detail.