In the present times Bond Market High Yield refers to the Bond Market where usually companies in need of working capital for growth and expansion programs issue bonds which account for higher rates of income than those offered through bonds sold in the regular Bond Market. This was made possible through the reduction in interest rates which encouraged an increasing number of public companies to come back to the Bond Market in order to refinance old debt at lower rates.
A little earlier though High Yield Bonds were issued in the Bond Market High Yield in order to provide the capital required for speculative takeovers and mergers. As according to recent records the Bond Market High Yield has become increasingly more liquid, diversified and believable to the prospective investors. And the the number of broker-dealers and banks participating in the Bond Market High Yield is increasing by the day.
More and more investors are flocking to the Bond Market High Yield for the reasons stated below :
higher current yield (income) for the higher interest rates on offer
high yield bonds command a legal priority over common and preferred stocks in case the issuer undergoes liquidation
following an upgradation of the debt security by any credit rating agency the bond may be entitled to a capital appreciation
The lower credit quality of the bonds on offer at Bond Market High Yield however involves greater risk than in a regular Bond Market.
Presently Bond Market High Yield include numerous participants unlike the early 1980s when only a handful of companies made use of the Bond Market High Yield to carry out speculative takeovers and mergers. The existent broad Bond Market High Yield mainly includes :
Companies which are rising in both fortunes and volume or which have just been inaugurated
investment-grade companies whose credits have heavily suffered in recent times
Companies that have suffered huge debts and approaching a probable fall in its credits
Companies which are refinancing debt effected by a fall in the rates of interest
Capital-intensive companies which cannot gather the total amount required by them through earnings or bank borrowings.
The Bond Market High Yield draws the participation of a large number of either individual or institutional investors who can be classified as :
direct individual bondholder
individual bondholder through mutual funds
insurance companies
pension funds
other institutions like Collateralised Bond Obligation Organizations.