The year 2002 was remarkably difficult on many fronts for most financial markets. For the high yield bond market, it was again a year of record amounts of defaults which contributed to low recovery rates and slightly negative absolute returns. (...)

The defaulted and distressed, public and private debt markets in the United States increased enormously to a record $942 billion (face value) at the end of 2002. The market value of this increasingly attractive alternative investment segment was approximately $512 billion. (...)

The third-quarter 2002 default rate for high yield bonds was 4.95%, based on $37.48 billion of defaults. The quarterly default rate is the highest in history, surpassing the first quarter of 1991 rate of 4.80%.(...)