S&P says high-yield market remains volatile

Standard & Poor's said volatility returned in late October, sending high-yield cash spreads wider.

"Despite low issuance in August and early September, the combined leveraged-loan and high-yield new issuance year to date has matched the full-year 2006 amount, with more than $113 billion in high-yield bonds and $500 billion in leveraged loans," Diane Vazza, head of S&P's global fixed income research group, said in a written statement.

"The current forward leveraged finance calendar is $282 billion, of which 34% or $95 billion are bonds," Vazza said, with $78 billion in bonds and $139 billion in loans tied to leveraged buyouts or mergers and acquisitions.

Credit metrics for speculative-grade credits were stable in September, with 17 downgrades and 12 upgrades.

"One default in September pushed the 12-month trailing U.S. speculative-grade default rate down to a record-low 1.13% from 1.27% recorded in August," Vazza said. "We continue to hold our default rate forecast to 1.4% for the end of 2007, though it would take about nine additional defaults to reach that target. We emphasize that structural concessions in many deals will most likely soften the chance for a material increase in defaults in the near term."

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