REVISITING THE HIGH-YIELD BOND MARKET

The low-grade, high-yield corporate debt market is revisited after it has persevered through a tumultuous 14-year (1978-1991) modern "junk" bond period. Empirical findings are combined with conceptual issues to shed further light on the continuing debate surrounding the measurement and interpretation of defaults and returns. We find evidence of a resiliency in this market and a profile that has gone from a moderately risky market in the early 1980s to much higher risk in the late 1980s and a return to more conservatively financed issues in the early 1990s. Our forecast is for a continued presence of publicly issued low-grade corporate debt although the size of the market has decreased of late.