Uncovering the dark side of high-yield vintages

Defaults are a natural part of high yield investing, but headline default statistics say little about how risk actually develops over time. By analysing defaults by issuance cohort, this report shows where credit risk has historically accumulated in the Nordic high yield market and highlights the different roles played by cyclical sector dynamics and more persistent structural factors in shaping default outcomes.

Key takeaways:

~12% lifetime default rate: Across mature Nordic HY cohorts (2015–2022), around 12% of issued bonds have ended in a hard default (realised monetary loss), placing Nordic HY between global BB- and B+ benchmarks.
 
Faster early defaults in recent vintages: The 2023–2024 cohorts have progressed towards default at a steeper pace than the historical average. Even if lifetime default rates converge, earlier loss realisation has already weighed on realised returns.
 
Defaults cluster after seasoning: Default risk is highly non-linear. Roughly 40% of defaults occur 1.5–2.5 years after issuance, while only ~10% occur within the first 18 months.

Structural sole vs joint gap: Sole-led transactions account for ~35% of issuance volume but ~55% of hard defaults in mature cohorts. The dispersion is wider in sole deals, implying higher risk but also higher compensation, making selectivity critical.
 
Sector effects are cyclical: Sector-driven default outcomes tend to cluster in weaker periods (e.g. oil and offshore earlier, real estate in 2022) and often mean-revert as issuance discipline adjusts through the cycle.

Bottom line:

Default statistics show that credit risk in Nordic HY is not evenly distributed. Both structural factors (transaction structure) and cyclical factors (sector exposure) create recurring patterns in where losses ultimately materialise. This means that issuer analysis, deal scrutiny and selection matter materially for outcomes. Defaults are not random, and understanding where risk tends to accumulate has historically been a source of value for investors willing to go beyond headline spreads and default rates.

Merk: Å kjøpe og selge aksjer innebærer høy risiko fordi verdien i verdipapirer vil svinge med tilbud og etterspørsel. Historisk avkastning i aksjemarkedet er aldri noen garanti for framtidig avkastning. Framtidig avkastning vil blant annet avhenge av markedsutvikling, aksjeselskapets utvikling, din egen dyktighet, kostnader for kjøp og salg, samt skattemessige forhold.

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