US High Yield corporates are delivering solid results following a first quarter of earnings beats and generally positive guidance. Although leverage ratios have seen a minor increase of 0.05x in 2024, leverage ratios remain well below the long-term average of 4.31x, currently standing at 3.98x. This ratio has been stable below 4x since the second quarter of 2022 (Blue line = Debt/EBITDA; a lower ratio indicates better credit quality).
Regarding the coverage ratio, the impact of high coupons has been more pronounced, causing a sharper decline over the last few quarters, aligned with rising interest rates. Nevertheless, the ratio remains comfortably above the historical average of 4.5x and is expected to stabilize as interest rates decrease over the next few quarters (Green line = EBIT/Interest expense; a higher ratio indicates better credit quality).
