Defaults & Returns on High Yield Bonds: Analysis Through September 30, 2002
Bibliographic record
Abstract
The third-quarter 2002 default rate for high yield bonds was 4.95%, based on $37.48 billion of defaults. The quarterly default rate is the highest in history, surpassing the first quarter of 1991 rate of 4.80%. One massive default, WorldCom, accounted for $28.30 billion of defaults (76%). Without WorldCom, the third quarter default rate would have only been 1.2%. The dollar weighted default rate for the first three quarters has already broken the record for a single calendar year reaching 10.98%. And, the latest four-quarters’ default rate of 15.01% has also set a record. Again, WorldCom’s huge default contributed about 4% of this record total. The persistently high default rate through the third quarter has resulted in a near record yield spread of 10.10% -- second only to 1990’s 10.50%. The current yield spread is more than 5% above the historical average. We believe the default rate has peaked in Q3-2002 and depending on the size of the decline, we believe the huge yield spread could reflect an over-sold market. Counting WorldCom ($46.0 billion in liabilities), there were more than $197 billion in liabilities of firms which filed for Chapter 11 protection through the third quarter and 26 firms had liabilities greater than $1 billion. The count was 22 firms through the first-half of the year, so the third-quarter number was "only" four, including WorldCom. There were 39 of such firms in 2001 -- a record year.
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.000 | 0.000 |
| Meta-epidemiology (narrow) | 0.001 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.000 | 0.000 |
| Science and technology studies | 0.001 | 0.001 |
| Scholarly communication | 0.000 | 0.000 |
| Open science | 0.001 | 0.000 |
| Research integrity | 0.000 | 0.001 |
| Insufficient payload (model declined to judge) | 0.007 | 0.002 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; both teacher heads agree on what is shown here.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".