Bank of America: Junk Bond Defaults Could Surge

Thursday, 25 Feb 2010 06:03 PM

By Dan Weil

  Comment  |
   Contact  |
  Print   |
    A   A  
  Copy Shortlink
The junk bond market could be in for big trouble, as more than $600 billion of high-yield bonds and loans come due starting in 2012, says Bank of America Merrill Lynch.

“While the wall-shaped schedule of future maturities is nothing new for the high-yield issuer universe, it is more front-loaded today,” Bank of America analysts Oleg Melentyev and Mike Cho wrote in a note to clients obtained by Bloomberg.

“This could result in additional default pressures further down the road, as issuers deal with a higher concentration of maturities than they what they have been dealing with in the past.”

Junk bonds returned a record 57.5 percent last year, and many experts warned the move was overdone.

Almost 90 percent of high-yield loans outstanding mature in the next five years, compared with an average of 36 percent between 2005 and 2009, according to the report.

That’s because companies have shortened their loan maturities to a range of three-five years.

Debt maturities constitute “a point of particular concern in our view, given that primary loan issuance remains challenged by declining bank lending,” the analysts wrote.

Don’t count Pimco among the junk bond bears. It says junk bond returns could hit low double digits this year.

"We believe investors can capture attractive yields and excess spread in the high-yield market with relatively low default risk," Andrew Jessop, a high-yield portfolio manager, wrote on Pimco’s Web site.

© 2014 Moneynews. All rights reserved.

  Comment  |
   Contact  |
  Print   |
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
Zip Code:
Privacy: We never share your email.
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Mali's Islamists Withdraw Cease-Fire Pledge

Friday, 04 Jan 2013 13:06 PM

Tens of thousands of Fatah supporters rallied in the Hamas stronghold of Gaza on Friday for the first time since they we . . .

Fmr. CIA Director Hayden: Iran Nuclear Crisis Gets 'Scarier'

Tuesday, 17 Jul 2012 18:11 PM

 . . .

Join Fmr. CIA Director for Special Iran Briefing, Assess the Danger

Friday, 13 Jul 2012 12:27 PM

 . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

America's News Page
©  Newsmax Media, Inc.
All Rights Reserved