High-yield issuers must pay up as risks increase

Investors are demanding higher compensation due to the potential rise in Asian corporate defaults, mounting geopolitical risks and a China slowdown.

High-yield issuers must pay up as risks increase

Looming corporate defaults, escalating geopolitical risks and a slowdown in China’s economy is leading to a rise in the cost of financing for high-yield borrowers, prompting investors to exercise caution and demand higher compensation.

The trailing 12-month high-yield default rate for Asia-Pacific corporates as of end-July was 4.1%, up from 2.2% at end-2013, according to a recent Moody’s report. The default rate for the sector is expected to peak at 4.3% in September.

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