U.S. Distress Ratio Drops for First Time Since May '15, S&P Says

The percentage of junk bonds trading at distressed levels in March dipped for the first month since May 2015 amid a rebound in oil prices and improved unemployment figures.

One in four speculative-grade securities were trading at distressed levels as of March 15, compared with one in three at Feb. 15, according to Standard & Poor’s so-called distress ratio. The ratings firm defines distressed debt as carrying a Yield Yield A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as a A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as a Read this Term of at least 10 percentage points more than similar-maturity Treasuries and said that borrowers with debt trading at those levels have about $201 billion of outstanding bonds maturing between 2017 and 2023.

“An uptick in oil prices, an easing in unemployment rates and market participants looking at the possibility of fewer rate hikes this year were all contributing factors to a hiatus in Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term that tightened spreads, and distress has been pulled in line with that,” said Diane Vazza, head of S&P’s global fixed income research group.

Still, despite the decline S&P cautioned that the ratio remains “historically high.” Vazza said that commodities-related companies were the “biggest drivers of distress.”

S&P’s distress ratio is calculated by dividing the number of distressed securities by the total amount of speculative-grade issues. An increase in the figure indicates that defaults could rise.

Oil and gas companies constituted a smaller portion of the ratio than in the previous month, with just 128 distressed issues in March compared with 172 in February out of a total of 438 issues, according to a report by S&P. However, oil and gas was the most distressed sector at 63.1 percent, with metals and mining next at 60.6 percent, according to the report.

Borrowers with debt trading at distressed levels currently have about $201 billion of outstanding bonds scheduled to mature between 2017 and 2023, according to the report.

To contact the reporter on this story: Carol Ko in New York at cko37@bloomberg.net. To contact the editors responsible for this story: Nabila Ahmed at nahmed54@bloomberg.net, Eric J. Weiner, Kenneth Pringle

By: Carol Ko

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