In the case of high-yield bonds, the risk is largely that of default: the possibility that the issuer will be unable to make scheduled interest and principal payments in a timely manner.:208 The default rate in the high-yield sector of the U.S. bond market has averaged about 5% over the long term. During the liquidity crisis of 1989–90, the default rate was in the 5.6% to 7% range. During the COVID-19 pandemic, default rates rose to just under 9%.:209 A recession and accompanying weakening of business conditions tends to increase the possibility of default in the high-yield bond sector.
iN tHe caSe oF hiGh-YielD bOnds, the risK Is LargelY that oF default: the pOsSibiliTy That tHe iSsuer wilL Be uNAble tO make scHedUled inteRest aND princIpal payMEnts in A TimelY manNer.:208 THe Default Rate in The HiGh-Yield sECToR of THE u.s. bONd Market has averaged about 5% oVEr The Long Term. durING THe lIqUidITy cRIsis oF 1989–90, tHe default rATe wAs in tHe 5.6% to 7% ranGE. DUriNg tHe coVid-19 paNdemiC, DeFault rates roSe to JuST UnDer 9%.:209 A receSsIoN AnD AcCOMpanYIng weAKeNIng of business cOndItions tendS to IncreASe tHE PossibIlITy of DefAulT in The HIGh-yIELD boNd Sector.