In a report released last week it was stated that European high yield bond default rates would double in the coming months, from 18.7% to 32%. However, Portfolio Adviser has since been advised the figures in the report were wrong, and should have read 0.18% and 0.32%.
Stephen Tapley, assistant manager of the RLAM Global High Yield fund, said the asset class is an attractive proposition, having produced nine consecutive months of strong returns, and it is an ‘exciting time’ to be participating in the asset class.
Victoria Hasler, fixed income analyst at Brewin Dolphin, said: “We’re seeing a default rate of about 2% at the moment and there is no reason for a dramatic rise. Many companies are deleveraging and have more cash on their balance sheets which offers a buffer from the economic cycle, while QE is keeping default rates low because of the low interest rates.
Ratings agency Fitch, meanwhile, stated that the default rate has been between 2% and 4% since 2010, and that figure is not likely to change significantly.
Ed Eyerman, managing director at the firm, said: “It’s certainly a growing market and we are seeing more fallen angels and mid-market corporations issuing high yield bonds as an alternative to debt finance. While there is the risk of further eurozone volatility, and the chance of riskier issues entering the market , those companies in the high yield bond zone are still biased towards B+ or higher ratings.
“Default rates are not of material concern because of the quality of issuances.”
S&P Capital IQ apologised for its error and said the report would be amended.
