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Covenant quality on high-yield hits record low says Moody's

  • The average covenant-quality score for high-yield bonds deteriorated to 4.36 in February from 3.84 one month previous (ranking is from 1 to 5, with 5 the weakest). It's the lowest print since Moody's began tracking the gauge in January 2011.
  • The decline was driven by a near-record percentage of high-yield-lite bonds - 39% of issuance in February vs. just 10% in January. “These bonds lack a debt incurrence and/or a restricted payments covenant and automatically receive our weakest score of 5.0," says Moody's Evan Friedman.
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