US and energy firms dominate high yield defaults

Investors in US high yield have had to deal with the largest number of bond defaulters this year as defaults continue to rise to financial crisis levels. US firms account for 74, or 67%, of the total 111 corporate defaults so far in 2016, according to research by S&P Global Ratings. The 111 defaults this year means the level of defaults is already approaching the total figure of 113 last year. S&P also said the global energy and natural resources sector has seen a default rate seven times higher than other sectors. Of the global firms that are in default, 53% are from the energy sector. Some investors had hoped the commodity price rebound earlier this year would save those smaller, highly leveraged energy firms. Diane Vazza, researcher at S&P, said that the default tally is now 40% higher than it was at this point last year. She repeated a point made in April that default rates were previously this high in 2009 following the financial crisis. There appeared to be a renewed appetite for US high yield earlier this year although many investors were stripping out energy companies. The latest research from S&P showed that there were two additional defaults in August alone, financial institution CNG Holdings and the other was energy company LTR Holdco. ©2016 funds europe

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