US junk debt deals carry higher guardrails for investors

Sept 15 - U.S. junk-bond offerings have spiked in recent weeks on the back of strong demand from investors looking to boost their returns buying the risky yet high-yielding debt.

Of a total $121 billion in new junk bond supply so far this year, 55% was secured. This stands in stark contrast to the same period in 2022, when only 25% of a total $81 billion was secured debt, according to Informa Global Markets data. The rise in protections also shows investors have had more influence on how new debt should be structured.

The extra level of protection and high investment returns are ensuring strong demand for new junk debt. The ICE BofA High Yield Index had total year-to-date returns of 7.25%, while the Morningstar LSTA U.S. Leveraged Loan 100 Index returned 9.66%. In comparison, the ICE BofA Corporate Index, which tracks investment-grade bonds, has seen a 2.01% total return so far this year.

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