OREANDA-NEWS. The trailing 12-month (TTM) U. S. high yield bond default rate finished 1H16 at 4.9%, the highest level since May 2010, says Fitch Ratings. The $50.2 billion of defaults during 1H16 alone is greater than the $48.3 billion seen in full year 2015. Fitch believes defaults are on track to tally as much as $90 billion by year-end.

Energy companies continue to account for a sizable portion ($28.8 billion) of defaults in 1H16, bringing the energy sector default rate to 15%, while the E&P sub-sector rate is at 29%. Despite the run up in prices since the February trough, there will be additional sector defaults, with Halcon Resources expected to file imminently.

"The combination of high energy and metals/mining default rates and lower year to date issuance has been a one-two punch for the high yield bond market this year," said Eric Rosenthal, Senior Director of Leveraged Finance. "The question going forward is whether macro events will disrupt markets and restrain issuance for the remainder of the year."

In June, high yield issuance topped $20 billion for the fourth consecutive month, bringing issuance to $116 billion through end-June. Annual issuance would approach the $251 billion level of 2016 if future monthly volumes continued at the same pace for the rest of the year.

Trading prices in the high yield secondary market are looking better, with bids already rebounding from their short-lived dip following the Brexit news. Average bids had dropped more than 100 basis points to 92.4 over a two-day span but are now above pre-Brexit levels following eight straight trading days of gains.