Altman (1989, 1991, 1992) suggests speculative-grade bond risk premiums of 300 to 500 basis points over Treasuries, whereas Hickman (1958) found that, from 1900 to 1943, the annual yield spread between speculative-grade bonds and high-grade bonds was approximately 300 basis points.
Much of the market-related systematic risk found in speculative-grade debt is due to markets reacting to changes in the economy in the same manner that the speculative-grade bond market reacts to changes in the economy.
The efficiency and continued viability of speculative-grade bond markets is of considerable importance to future economic growth since 95 percent of all corporations in this country with sales over $35 million do not qualify for investment-grade debt.
0394 Notes: (a)=par value of defaulting speculative-grade bonds (b)=total par value of speculative-grade bond market excluding defaulted issues (c)=traditional frequency measure is aggregate par value of defaulting bonds in year t divided by aggregate par value of outstanding bonds in year t; we normalize [F.
At this time last year, the European speculative-grade bond
Columns 7 and 8 of Table 1 present default rates on investment-grade and speculative-grade bonds, respectively, calculated by Fons, Carty, and Girault (1993).
Call options on corporate bonds are now mostly observed on speculative-grade bonds and on long-term investment-grade bonds (e.
In our sample, speculative-grade bonds are almost exclusively 7 to 12 years in maturity, most are callable, and none has a maturity over 20 years.
Uneasiness about rising bond defaults contributed to chaotic conditions in the market for speculative-grade bonds early this year as prices of restructuring-related issues dropped precipitously.
In addition, many new offerings of speculative-grade bonds have been convertible into equity or have included equity-like features, such as warrants.