Analysis of the Factors affecting the Credit Risk Spreads with Different Credit Ratings in High-Yield Bonds

Abstract

Nowadays, financial products are an indispensable product in daily life. How to increase the rate of return in asset allocation is also an issue that more and more people are paying attention to. Among them, many ambitious people focus on high-yield products. But high returns also mean high risks. This article will (1) analyze the composition and overall characteristics of the credit risk spread of high-yield bonds, (2) analyze the factors that affect the credit risk spread of highyield bonds and combine different levels of credit ratings and related credit risk factors. By comparing the interest rates of ten-year U.S. Treasury bonds, the characteristics of the credit risk spreads of high-yield bonds are sorted out and summarized. And use regression analysis to find out the credit risk factors that are most relevant to the credit risk premium of high-yield bonds with different credit ratings from the fifteen credit risk categories and give specific explanations.