High-yield debt
Lending to borrowers likely enough to default that the interest rate has to compensate for it.
The invention
The problem. Companies below investment grade could not raise debt at all, regardless of prospects.
Michael Milken's insight was empirical: a diversified pool of low-rated bonds historically returned more than the default losses cost. He was right about the statistics, built a market on it, and went to prison for what he did around the edges of it. Both halves are load-bearing.
Portraits at the Stock Exchange
ca. 1878–79 · The Metropolitan Museum of Art · CC0
Where it has failed
Not a list of disasters. A pattern library.
- 1989–1990United States
The market seizes
Drexel Burnham collapsed, the high-yield market froze, and leveraged deals financed at the peak defaulted en masse.
A market that depends on one firm to make prices is not a market. Liquidity from a single participant vanishes when they do.
- 2015–2016United States
Energy high-yield
Oil's collapse triggered a wave of shale defaults; a large fund blocked redemptions entirely.
A fund promising daily liquidity on assets that trade rarely has made a promise it cannot always keep.
Where it stands today
You now have the shape. Here is the reading.
Live from public data, pulled at request time. Read it with the failures above in mind — not because a repeat is due, but because knowing the mechanism is what lets you recognise one early.
Federal funds rate
Federal Reserve via FRED
No data returned
FRED (St. Louis Fed) needs FRED_API_KEY in your environment. It is free to obtain — see the sources screen for the link.
Federal Reserve via FRED
In your ledger
Often held unknowingly inside a 'bond' allocation. Worth checking what your fixed income is actually lending to.
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