Home Breadcrumb caret Investments Breadcrumb caret Market Insights Equity and high-yield markets doubling The high-yield market has nearly doubled over the past five years to US$1.3 trillion. By Sarah Cunningham-Scharf | July 2, 2014 | Last updated on July 2, 2014 1 min read The high-yield market has nearly doubled over the past five years to US$1.3 trillion. “Part of that is because prices were depressed five years ago,” says Nicholas Leach, vice-president of global fixed income, high yield at CIBC Asset Management. He is lead manager of the Renaissance High-Yield Bond Fund. Read: 4 obstacles to high-yield returns “But in addition, the new issue market has reached record levels of about $300 billion a year. And while 60% of the proceeds have been used to re-finance existing debt, a lot of companies have diversified their funding sources away from just bank loans. They’ve grown to the size where they can go to the high-yield market.” Equity markets are also up 50% from two years ago. As a result, companies that previously had pension deficits are now posting surpluses. That’s also due to the rise in treasury rates. Read: Surprise! Corporate pensions are okay “Once the credit rating agencies start to acknowledge that, we could see some upgrades, just because of the improvement in those off-balance-sheet obligations,” says Leach. And, the default rate was below 1% in 2013, and will likely stay below average for the next three or four years. Read: Seek safety in senior debt Finally, interest coverage ratios are strong, as is primary-market issuance, leading to strong credit quality. “Many companies have refinanced high-coupon bonds with low-coupon bonds, and they’ve also extended the maturities,” says Leach. Sarah Cunningham-Scharf Save Stroke 1 Print Group 8 Share LI logo