High-yield defaults recovery rates

High-yield defaults in Europe in both 2001 and 2002 produced weighted average recovery rates significantly below US historical averages. Investors recovered just 11% of par value on 2001 defaults and 15% of par on 2002 defaults. In the United States, recovery rates on... 

The research compares the model spread to the one observed in the market. In order to determine the term structure of credit spread. Eons uses historical probabilities by Moody s database, adopting a recovery rate of 48.38%. The empirical evidence is that bonds with high investment grade have an upward credit spread curve. Therefore, the spread between defaultable and default-free bonds increases as maturity increases. Conversely, speculative-grade bonds have a negative or flat credit yield curve (Figure 8.7). 

Default and Recovery Rates in the Emerging European High-Yield... 

Given this new landscape, in 2001, Fitch Ratings created a par based default index specific to the European high-yield market. The objective of this chapter is to compare and contrast default and recovery patterns across the two markets in order to give global bond investors and European investors, in particular, historical and current benchmarks for measuring credit risk. 

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