High-yield bond default and call risks

This paper empirically investigates high-yield bond default and call behavi or using a competing risks hazard model that simultaneously estimates the i mpact of bond age, issue-specific characteristics and business conditions o n both events. Results reveal nonmonotonic aging effects: default rates inc rease and then drop while call rates first increase and then level off. Rat ing and coupon size affect default risk, while maturity and issue size impa ct only call rates. Defaults are more likely when economic conditions have worsened and no improvement is anticipated. Calls are more likely when inte rest rates have decreased but are expected to rise.