Number of lowest-rated corporate issuers grows

The number of corporate issuers Moody's rates B3 negative or below as a percentage of the high-yield universe have been on the upswing for the last year. As of Oct. 1, the figure was 16.1%, flat from the prior month but up significantly from a year ago when it was 11.3%.

During the Great Recession and at the onset of the COVID-19 pandemic in 2020, the rate was over 20%. Since the start of 2007, the high was 27.5%, reached in July 2020.

The high-yield default rate was 4.9% at the start of the month vs. 1.45% a year ago.

There were 240 issuers rated B3 negative or lower out of 1,487 high-yield issuers. In October 2022, 177 issuers were in the rating category with a total of 1,566 in the high-yield universe.

Yields for the lowest-rated high-yield bonds have narrowed since the start of the year, based on the ICE BofA indexes. B-rated bonds have a 444-basis-point spread and CCC or lower rated securities' spread was 969 basis points vs. 500 and 1,158 basis points, respectively, in early January. However, spreads have widened since the end of August.