Investor protection on HY bonds hits low in January: Moody’s

Covenant quality on North American high-yield bonds declined to its lowest-ever level in January, mostly due to a spike in issuance of high-yield-lite bonds, Moody’s Investors Service said on Tuesday. High-yield-lite bonds provide investors with fewer protections than full covenant bonds on payment terms and collateral. The Moody’s Covenant Quality Index declined to 3.89 in January from 3.79 in December. The index measures covenant protection on a scale of 1 to 5 with 5 being the weakest. Moody’s has tracked the CQI since January 2011.
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