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Defaults And Returns On High Yield Bonds
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Book Synopsis Defaults and Returns in the High Yield Bond Market by : Edward I. Altman
Download or read book Defaults and Returns in the High Yield Bond Market written by Edward I. Altman and published by . This book was released on 2008 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dr. Altman has earned an international reputation as an expert on corporate bankruptcy, high yield bonds, distressed debt and credit risk analysis. In this article, Altman and his team provide a comprehensive review of the 2005 high yield bond market. The article provides detailed long-term analysis of the US market, as well as trends in default, bankruptcy, recovery and returns for investors. Against this historical backdrop, the article offers some guidance on expected default rates and market performance in the burgeoning high-yield distressed bond market.
Book Synopsis Defaults & Returns on High Yield Bonds by : Edward I. Altman
Download or read book Defaults & Returns on High Yield Bonds written by Edward I. Altman and published by . This book was released on 2008 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Nineteen-ninety-eight was a mixed performance year for the high yield bond market in the United States , with much below average returns and spreads over default-risk-free Treasury Bonds but continued relatively low default rates and losses and another record year of new insurance. Returns and new insurance were excellent through the first seven months of the year but returns reversed and new issues dried up, temporarily, in the wake of August's Russians default and the emerging market turmoil, causing another short-term flight to quality. Returns in 1998 on high yield bonds in the U.S. were slightly above 4.0% for the entire year, about 8.5% lower than historical averages. Return spreads also were much below average (-8.7%).The default rate was again relatively low, 1.60%, and losses from default 1.1%. Despite 1998's low relative return, net returns (after deducting losses from defaults) over the last two decades continue to show a compound result over 12% per year and spreads over U.S. Treasuries of over 2.5% per year. New insurance of high yield debt in 1998 totaled a record $152 billion, with $120 billion of the total in the first seven and a half months.This report documents the high yield debt market's risk and return performance by presenting default and morality statistics and providing a matrix of average returns and other performance statistics over relevant periods of the market's evolution. Our analysis covers the period 1971-1998 for defaults and 1978-1998 for returns. In addition, we present our annual forecast of expected defaults for the next three years (1999-2001). Two other reports, published by the NYU Salomon Center, comprehensively document the performance of defaulted public bonds and bank loans and the default rate experience on syndicated bank loans.
Book Synopsis Report on Defaults and Returns on High Yield Bonds : Analysis Through 1994 by : Edward I. Altman
Download or read book Report on Defaults and Returns on High Yield Bonds : Analysis Through 1994 written by Edward I. Altman and published by . This book was released on 1995* with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book High Yield Bonds written by and published by . This book was released on 1989 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Defaults and Returns on High Yield Bonds by : Edward I. Altman
Download or read book Defaults and Returns on High Yield Bonds written by Edward I. Altman and published by . This book was released on 2008 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: The year 2002 was remarkably difficult on many fronts for most financial markets. For the high yield bond market, it was again a year of record amounts of defaults which contributed to low recovery rates and slightly negative absolute returns. The default rate registered a massive 12.8%, based on $757 billion outstanding. Despite these record default totals and rates, the market s decline was orderly with little panic and actually ended the year with reduced defaults and highly positive returns in the fourth quarter. Default amounts registered its fourth consecutive record year and almost topped $100 billion ($97.9 billion) for the first time. This total was more than 52% higher than last year s record. Combined with a near record low recovery rate of 25 cents on the dollar, weighed down by Telecom s average recovery rate of 16%, loss rates from defaults reached record levels of about 10% -- even adjusted for fallen angel default recoveries. The pervasive influence of WorldCom s massive default had a profound effect on both the default and recovery rates. Without WorldCom, the year s default rate would have been 9.27% -- a differential of about 3.5%. This report documents and comments upon the high yield bond market s risk and return performance over the period 1971-2002. We will present traditional, dollar-denominated default rates as well as our own mortality rate statistics. Default rate analysis will be complemented by discussion on corporate bankruptcies and the immense impact of fallen angels on the high yield market. We conclude with our annual estimate of the size of the distressed debt market and our forecast for defaults in 2003. Our analysis will include an update on our default recovery forecasting model which was extremely accurate in estimating 2002 s recovery rate of about 25%. Based on the fourth quarter s reduction in default rate to 1.82% and our aging-mortality conceptual framework, we are predicting a reduction in the dollar denominated default rate to 7.5-8.0%, as much as 5% less than 2002 (but still far above the average rate). This should help provide a more attractive environment for high yield debt new issues and returns in 2003. In 2002, there was $65.6 billion in new high yield bond issuance, down from 2001 s $88.2 billion. We expect new issuance in 2003 to escalate unless the economic/political scene motivates another flight to quality in our financial markets.
Book Synopsis Defaults & Returns on High Yield Bonds by : Edward I. Altman
Download or read book Defaults & Returns on High Yield Bonds written by Edward I. Altman and published by . This book was released on 2008 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Full year 1999 was again a mixed performance year for the high yield bondmarket in the United States but for different reasons than the mixed 1998performance. Once again, total returns were lackluster, registering just +1.73%. But, unlike last year s companion negative return spread vs. U.S. ten-year Treasuries, the return spread in 1999 was a positive 10.1%, as yield spreads increased significantly and Treasuries tumbled. And again, new issuance of high yield bonds was impressive, topping $100 billion for the third consecutive year, but aggregate defaults increased dramatically to an all-time record level of over $23 billion (face value). The default rate registered a sizeable increase, topping 4% (4.15%) for the first time since 1991 and significantly above the 1.6% level of one year earlier.Combined with a relatively low recovery rate of below 30 cents on the dollar, thedefault loss rate was 3.2% in 1999, compared to a historical arithmetic annualaverage of 1.9%. Despite 1999 s low absolute return, net returns (after deducting losses from defaults, rating migrations and interest rate changes) for the 1978-1999 period continued to show an attractive compounded return spread over U.S. Treasury bonds of close to 3.0% per year (2.96%). This report documents the high yield bond market s risk and returnperformance by presenting traditional and mortality default rate statistics andproviding a matrix of performance statistics over the relevant periods of themarket s evolution. Our analysis covers the 1971-1999 period for defaults and the 1978-1999 period for returns. In addition, we present our annual forecast of expected defaults for the next three years (2000-2002). Our 1999 forecast was for substantially higher defaults than 1998, but we underestimated the record defaultlevels. Default levels and rates were swelled in 1999 due to a number of factors,including the huge new issuance in the 1997-1999 period, a trend toward earlier defaults, deteriorating credit quality of new issues, pockets of industry fragility, and the continued vestige of 1998 s flight to quality. For 2000, we expect default levels to decline to about $17.5 billion and the default rate to regress to around three percent of the amount outstanding.
Book Synopsis Defaults and Returns on High Yield Bonds by : Edward I. Altman
Download or read book Defaults and Returns on High Yield Bonds written by Edward I. Altman and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The year 2001 was remarkable on many fronts. For the high yield market, it was a year of crushing record numbers of defaults and distressed exchanges, combined with predictable low recovery rates. Despite these fundamental problems and the quot;flight to qualityquot; following the terrorist attacks in September, the high yield market displayed impressive resiliency.This report documents and comments upon the high yield bond market's risk and return performance by presenting traditional and mortality rate statistics and providing performance data over the market's history. Our analysis covers the period 1971-2001. In addition, we present our forecast of expected defaults.Two new innovations to our analysis of the high yield bond market are also introduced. We adjust our traditional measure of default loss rates by factoring in the impact of fallen angel defaults where the quot;investmentquot; in these issues is typically much below par value. Finally, we summarize some recently completed work, on analyzing default recovery rates, with an econometric model that has explained over 90% of the variation in recoveries over the last two decades.
Download or read book HIGH YIELD BONDS written by Mark Shenkman and published by McGraw Hill Professional. This book was released on 1999 with total page 614 pages. Available in PDF, EPUB and Kindle. Book excerpt: HIGH-YIELD BONDS provides state-of-the-art research, strategies, and toolsÑalongside the expert analysis of respected authorities including Edward Altman of New York UniversityÕs Salomon Center, Lea Carty of MoodyÕs Investor Service, Sam DeRosa-Farag of Donaldson, Lufkin & Jenrette, Martin Fridson of Merrill Lynch & Company, Stuart Gilson of Harvard University, Robert Kricheff of CS First Boston, and Frank Reilly of the University of Notre DameÑto help you truly understand todayÕs high-yield market. For added value and ease of reference, this high-level one-volume encyclopedia is divided into seven sections detailing virtually every aspect of high-yield bond investment. They include: Market structureÑThe role of investment banks in security innovation and market development, evolution of analytical methodologies, and recent leveraged loan market developments; Security risk analysisÑHistorical bond default rates, real interest rate and default rate relationships, and new simulation methodologies for modeling credit quality; Security valuationÑImpact of seniority and security on bond pricing and return, important trading factors, and a Monte Carlo simulation methodology for valuing bonds and options in the context of correlated interest rate and credit risk; Market valuation modelsÑEconometric studies which detail the importance of monetary influences, risk-free interest rates, default rates, mutual fund flows, and seasonal fluctuations; Portfolio managementÑHistorical perspective and comparison to alternative investments, analysis of indices available to investors, and specific portfolio selection and risk management strategies of professional fund managers; Distressed security investingÑHistorical risk and return information, plus an academic overview of the market and decision criteria for uncovering and investing in securities with higher-than-average risk-adjusted returns; Corporate finance considerationsÑEmerging firmsÕ strategic choice between external debt and equity financing, as well as the choice of issuing public versus private (Rule-144a) securities. HIGH-YIELD BONDS provides extensive coverage of bond valuation and the construction and management of high-yield portfolios. Advanced Monte Carlo simulation models for the valuation of bonds and options on bonds as well as risk assessments on portfolios of bonds under conditions of correlated interest rate and credit risk are demonstrated. In todayÕs explosive environment of multiple new issues and high risk versus return relationships, it is paramount that you get advice from analysts and experts who have been influential in shaping and defining the market. HIGH-YIELD BONDS will provide you with a valuable reference to this fascinating and constantly changing class of securities, helping you assemble a stable, diversified portfolio of fixed income investments that provides the greatest returns and the lowest risks.
Book Synopsis Defaults and Returns on High Yield Bonds by : Edward I. Altman
Download or read book Defaults and Returns on High Yield Bonds written by Edward I. Altman and published by . This book was released on 2008 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Nineteen-ninety five was an excellent year for the high yield market with relatively low defaults combined with returns of almost 20%, the highest since 1991. When viewed in comparative terms with other fixed income securities markets, however, the high yield debt market s performance in 1995 was not exceptional. This report documents the high yield debt market s risk and return performance by presenting default and mortality statistics and providing a matrix of average returns and other performance statistics over the relevant periods of the market s evolution. Our analysis covers the period 1971-1995 for defaults and 1978-1995 for returns.
Book Synopsis Defaults and Returns on High Yield Bonds by : Edward I. Altman
Download or read book Defaults and Returns on High Yield Bonds written by Edward I. Altman and published by . This book was released on 2008 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Nineteen-ninety-four was a relatively lackluster year for the high yield market with relatively low defaults combined with slightly negative total returns. When viewed in comparative terms with other fixed income securities markets, however, high yield debt performed quite well. Compared to long term U.S. Government securities, the average yield spread on high yield debt dropped to the lowest year-end level (3.44%) since 1984. This report documents the high yield debt market s risk and return performance in 1994 by presenting default and mortality statistics and provides a matrix of average returns and other performance statistics over the relevant periods of the market s evolution. Our analysis covers the period 1971-1994 for defaults and 1978-1994 for returns.
Book Synopsis Defaults and Returns on High Yield Bonds by : Edward I. Altman
Download or read book Defaults and Returns on High Yield Bonds written by Edward I. Altman and published by . This book was released on 2008 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: The third-quarter 2002 default rate for high yield bonds was 4.95%, based on $37.48 billion of defaults. The quarterly default rate is the highest in history, surpassing the first quarter of 1991 rate of 4.80%. One massive default, WorldCom, accounted for $28.30 billion of defaults (76%). Without WorldCom, the third quarter default rate would have only been 1.2%. The dollar weighted default rate for the first three quarters has already broken the record for a single calendar year reaching 10.98%. And, the latest four-quarters default rate of 15.01% has also set a record. Again, WorldCom s huge default contributed about 4% of this record total. The persistently high default rate through the third quarter has resulted in a near record yield spread of 10.10% -- second only to 1990 s 10.50%. The current yield spread is more than 5% above the historical average. We believe the default rate has peaked in Q3-2002 and depending on the size of the decline, we believe the huge yield spread could reflect an over-sold market. Counting WorldCom ($46.0 billion in liabilities), there were more than $197 billion in liabilities of firms which filed for Chapter 11 protection through the third quarter and 26 firms had liabilities greater than $1 billion. The count was 22 firms through the first-half of the year, so the third-quarter number was quot;onlyquot; four, including WorldCom. There were 39 of such firms in 2001 - - a record year.
Book Synopsis Defaults and Returns on High Yield Bonds by : Edward I. Altman
Download or read book Defaults and Returns on High Yield Bonds written by Edward I. Altman and published by . This book was released on 2008 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first quarter 2004 default rate for U.S. (and Canada) dollar-denominated high yield bonds was 0.41% based on $3.6 billion of defaults. This rate was just slightly higher than the fourth quarter 2003's very low rate of 0.36%. The latter was the lowest quarterly rate since the third quarter of 1998. The four-quarter rate as of March 31, 2004 continued its downward trend to 4.02% from 4.66% as of year-end 2003. There has only been one fallen angel default issue from a single company so far in 2004 compared to a total of 24 issues from 15 companies for all of 2003.New issues totaled a robust $43.8 billion, somewhat lower than the average quarterly figure for 2003 (which was almost a record high year). Returns on high yield bonds in the first quarter were 1.81% with a spread of -2.80% compared to ten-year Treasuries, which return 4.61%. The distressed ratio on high yield bonds increased slightly to 6.6%, up from 5.7% as of year-end 2004. In addition, the yield spread on high yield bonds increased by 43 bp over the past three months. While the increase in both the distress ratio and the high yield bond spread were minor, they indicate a market sentiment that is growing slightly more concerned about default risk.
Book Synopsis Defaults and Returns in the High Yield Bond Market by : Edward I. Altman
Download or read book Defaults and Returns in the High Yield Bond Market written by Edward I. Altman and published by . This book was released on 2008 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: High yield bond defaults in 2003 declined significantly from record 2002 levels closing the year at $38.5 billion for a default rate of 4.66%. The fourth quarter s rate of 0.36% was the lowest quarterly rate since the fourth quarter of 1997. The default loss rate for 2003 also declined to just 2.76% based on a weighted average recovery rate of about 45% -- a majorimprovement from the 25% levels of the prior several years. Fourteen of the 86 defaultingcompanies had issues that were investment grade sometime prior to default. These fallenangels accounted for 33% of defaulting issues and 46.3% of the defaulted volume in 2003.The high-yield bond market returned an impressive 30.62% for the year, the third highest one-year return since 1978 (when we first began tracking returns). The return spread over ten-year US Treasuries was a record high 29.4%, bringing the historic average annual return spread to 2.22% per year. The concurrent yield spread at year-end fell to 3.74%, the lowest year-end figure since 1997 and 4.82% less than one year ago. New issues in 2003 recorded anear record level of $137.4 billion; the vast majority was used for refinancing existing loan and bond issues.Based on our mortality rate methodology and assuming different measures of credit risk ofrecent new issuance, we expect default rates to continue their decline in 2004 to between3.2% - 3.8%, with rates increasing in 2005 to above 4.0%.
Book Synopsis Contemporary Challenges in Risk Management by : T. Andersen
Download or read book Contemporary Challenges in Risk Management written by T. Andersen and published by Springer. This book was released on 2014-12-02 with total page 420 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book focuses on two central aspects of the risk managing process, namely 1. how managers (can and do) assess developments in the external risk environment and deal with them, and 2. analysing the effects of risk management and different managerial approaches. The articles represent state of the art academic analyses and research contributions.
Book Synopsis The Default Risk of High-Yield Bonds by : Cynthia G. McDonald
Download or read book The Default Risk of High-Yield Bonds written by Cynthia G. McDonald and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the default behavior of original issue rated non-convertible high-yield bonds. Previous studies of high-yield bond defaults provide evidence of an aging effect: the longer bonds have been outstanding, the greater the default probability. However, Blume, Keim and Patel (1991) assert that this aging relationship reflects changing economic conditions. This study of bond defaults discriminates between the aging effect and the impact of macroeconomic changes. A hazard model is used to simultaneously estimate the impact of bond age, firm-specific and issue-specific characteristics, and changing economic conditions. The specification models the impact of time since issuance semi-parametrically, corrects for unobserved heterogeneity and allows for the possibility that outstanding bonds may default in the future. Our findings, based on a sample of 579 individual high-yield bonds issued between 1977 and 1989, suggest that, after controlling for annual changes in economic conditions, default rates increase with age. Bond characteristics at the time of issuance also impact the default behavior: BB rated bonds tend to have significantly lower default rates compared to CCC rated bonds; bonds with higher coupon rates have significantly higher default rates. In addition, high-yield bonds issued prior to 1980 experienced significantly lower default rates.
Book Synopsis Investing in Junk Bonds by : Edward I. Altman
Download or read book Investing in Junk Bonds written by Edward I. Altman and published by Beard Books. This book was released on 2003 with total page 278 pages. Available in PDF, EPUB and Kindle. Book excerpt: Details the rise and operation of the high yield debt market as illustrated by the "junk" bond.
Book Synopsis Report on Defaults & Returns on High Yield Bonds by : Anthony Saunders
Download or read book Report on Defaults & Returns on High Yield Bonds written by Anthony Saunders and published by . This book was released on 1991 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
