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:


Office of Public Affairs
(202) 512-4800

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 5, 2018

Jul 19, 2018

Jul 18, 2018

Jun 26, 2018

Mar 22, 2018

Mar 16, 2018

Mar 15, 2018

Feb 27, 2018

Looking for more? Browse all our products here