JUNK bond issues are set to soar past the $500bn mark for the first time this year, Standard & Poor’s (S&P) predicts, as companies flock to the bond markets for cash.
Total corporate bond issuance so far this year smashed past the $3 trillion mark in November, with S&P predicting the annual issuance will exceed the $3.1 trillion recorded for 2012.
Around 15 per cent of this issuance is set to be in the form of junk bonds – now dubbed high yield bonds, which are rated BB plus or lower. “With relatively few alternatives to improve yield, investors were eager to lend even to entities with lower credit quality,” S&P’s Diane Vazza said.
Default rates for speculative grade countries are also down this year, from 2.5 per cent in 2012 to 2.2 per cent in 2013.