Global high-yield issuance has reached an all-time monthly high of $47.226 billion in May, topping the previous record of $46.813 billion set in March of this year, according to Thomson Reuters data. The new record was set in 85 deals and includes dollar equivalent issuance.
Investors continue to pile into the asset class, lured by low default rates and relatively attractive rates in the current low-yielding environment. Issuers, meanwhile, are taking advantage of the lowest yields in history. The average yield to worst broke records earlier this month, hitting an all-time low of 6.71% on May 2, according to the Barclays Capital US corporate high-yield index.
The average yield dropped even further to 6.61% on May 16 before inching back up to 6.82% as recorded this Wednesday. This compares to a current average yield to worst of 1.75% for US Treasuries, according to Barclays. Meanwhile, Moody's reported a global default rate of 2.3% in April, down from 2.6% a month earlier. Moody's predicts that the rate will decline to 1.5% by the end of this year.
The record breaking volume illustrates just how strong the high-yield market remains despite ongoing volatility in the equity markets. "It's a perfect reflection of how equities have slid off the road the past three weeks, whereas on the fixed income side the tone is rock solid," said James Lee, senior analyst at Calvert Investments. Chrysler provided the biggest boost to May's volume, pricing a US $3.2bn issue which was the largest offering since March 2010, when Frontier Communications sold its US $3.2bn deal.