Just 25 years ago less than a quarter of corporate-bond issuers were ranked speculative, or junk. Now, according to Standard & Poor’s, a rating agency, it is nearly a half. Growth in the market is due to a number of factors. Investors are more willing to buy high-yield debt, thanks to low interest rates; banks are retreating from corporate lending, particularly in Europe; companies are keen to borrow, given the tax benefits. The shift means the average corporate bond is riskier than it used to be. The default rate is rising, but is still low by historic standards: just 2.5% of issuers defaulted in the year to September.
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