S&P Warns High-Yield Credit Quality Worst Since 2009 As "At-Risk" Debt Soars To $359 Billion

Tyler Durden's picture

A new report by S&P Global points out that the number of "at-risk" high-yield issuers (i.e. those with a B- or lower rating and negative outlook) soared in 2016 to the highest level since the "great recession" of 2009.  As Bloomberg points out, S&P's list of the most "at-risk" corporate issuers included 251 companies and $359 billion of debt which is the highest level since October 2009.  As S&P's head of global fixed income research notes, issuers at the low end of the HY rating spectrum have historically been 10x more likely to miss bond payments than other HY issuers.

S&P Junk Issuers


To be sure, Energy issuers are driving a disproportionate share of HY stress with 12-month trailing default rates increasing to 26.9% at the end of July. 

GS Energy HY Defaults


Meanwhile, defaults of Metals and Mining issuers declined somewhat from their peak but remained elevated with 12-month trailing default rates at 16.7% at the end of July.

GS Metals and Mining HY Defaults


Of course, none of that data concerns HY investors who have been on a buying spree so far in 2016 pushing spreads back toward all-time lows...

HY Spread


...While HY hedge funds record their 3rd best YTD performance in the past 18 years. 

GS HY Returns


All seems to make sense, right?  Deteriorating credit quality equals buying opportunity.

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major major major major's picture

I thought the Fed advised not to have energy companies default?

VD's picture

the great recession became the great depression in 2009, it's just that The Fed has papered over it and not allowed most observers to see it..... we are at the end of this empire on the downward trajectory and all anyone sees are financialization chimeras and mirages, for now...all empires crash out, and this next "correction" will certainly be one for the ages..

cheka's picture

best listen to the ratings cos

they were proven RIGHT during the 2007/8 collapse.  frbny backed all that trash.  AAA was spot on

Griffin's picture

Some of the Icelandic banks were triple A rated just before crashing and burning to crisp, taking with them the entire Icelandic economy.

Most of the scum bags responsible for that are still licking their wounds or still in prison.

I suppose credit ratings can be of some use to some people, but i would not trust them blindingly.


Iceland's credit rating seems to be recovering, after being reduced to junk in 08.




junction's picture

Someone paid too much for these junk bonds and securities and that someone is you, through your taxes.  A very few well-connected families got really rich unloading this dreck on the American taxpayer.  Those families for the next few generations are set, they will always have plenty of money in their trust funds and have income from their real estate portfolios purchased with money ripped off us. 

debtor of last resort's picture

We're bailing out energy since 1970. What's new?

cheka's picture

oversupply is the problem.  need a bigger/stronger cartel to create artifical scarcity

debtor of last resort's picture

Oversupply is a result of overshoot. Undersupply is the real issue, you know, when the fun starts.

buzzsaw99's picture

the fed will buy them

lester1's picture

And experts on Wall Street actually think a rate hike is coming?



Bill of Rights's picture

Raise those rates assholes we dare ya ...

wmbz's picture

Slow down with all this good news! The stawk market is on the launching pad already!

DOW 20,000 by or before X-Mas!

Wang Dang SP's picture

And gold to $3,000 by the 4th of July.

Stormtrooper's picture

Buy! Buy! Buy this dangerous shit!

Bailout! Bailout! Bailout!  Give me a bailout!!

Ajax_USB_Port_Repair_Service_'s picture

The industry needs to create some new ETF's to hedge the hedges that are already hedged by existing hedges that will soon fail to hedge the original investments that were hedged.

Yen Cross's picture

   I love this trade... I just hope I get paid.


scintillator9's picture

Actually Yen, my trader friend and I have been having this exact same conversation more and more often.......

We could all essentially be in this scenario at a casino in which we win the jackpot, but the the casino decided that the machine malfunctioned, and therefore we won a token amount. Thank you for playing, come again.

south40_dreams's picture

Heck, $359 Billion is less than facebook is worth, and we all know what a growth engine that booming enterprise is.....with its huge number of employees, massive real estate holdings, and vital infrastructure.  What?  They have none of those things?  Oh shit!!!!!

SloMoe's picture


"S&P" ???

Just sayn'...