High Yield Bonds:

Issues Concerning Thrift Investments in High Yield Bonds

GGD-89-48: Published: Mar 2, 1989. Publicly Released: Mar 2, 1989.

Additional Materials:

Contact:

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a legislative requirement, GAO discussed the high-yield bond market, focusing on: (1) federally insured thrifts' investments in high-yield bonds; (2) state and federal regulation of such investments; and (3) the relationship of high-yield bonds to federal monetary policy.

GAO found that: (1) the Federal Home Loan Bank Board (FHLBB) and thrift institutions lacked comparative data on high-yield bond investments, but a 3-year study by an economic forecasting firm showed that high-yield bonds had a high risk of default compared with other credit assets; (2) other studies also showed that high-yield bonds provided investors high net returns which outweighed the default losses; (3) in 1985, high-yield bond investments were a factor in one thrift institution's failure, but generally unsafe lending and investment practices caused the failure; (4) 11 thrift institutions reported a 2-percent default rate, resulting in over $9 billion in losses from high-yield bond investments, with expected actual losses totalling about $73 million; (5) economic experts believed that a severe economic downturn could impact default rates for high-yield bonds; and (6) FHLBB issued guidelines to protect thrift institutions investing in high-yield bonds from incurring unnecessary or unreasonable risks.

Sep 29, 2017

Sep 12, 2017

Sep 7, 2017

Apr 19, 2017

Mar 29, 2017

Feb 24, 2017

Dec 29, 2016

Dec 15, 2016

Nov 15, 2016

Looking for more? Browse all our products here