Bangkok--28 Jan--Standard & Poor's The high-yield market continued to be buffeted by the negative winds of concern swirling around the economy and the financial sector in January, according to an article published yesterday by Standard & Poor's. The report, titled "U.S. High-Yield Prospects: Starting The 2008 Race In Reverse (Premium)," says that speculative-grade bond spreads clearly reflected these fears, blowing out to 680 basis points (bps) as of Jan. 18, compared with 561 bps at year end. "Recessionary expectations are being revised downward, as weaker employment and higher oil prices could slow consumer spending more than had been expected," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Not surprisingly, market volatility has remained high in the new year and risk appetite low. This has caused a flight to quality that has brought the 10-year Treasury yield down 38 basis points and the two-year Treasury yield 69 basis points tighter between Jan. 18 and the end of 2007." High-yield credit spreads were on a roller coaster through 2007. During the first half, the spreads varied within the range of 250 basis points (bps) to 400 bps but accelerated sharply above the 500 bps mark from mid-November. The high-yield distressed ratio jumped to 6.15% on Dec. 10, the highest in the past 24 months. Elevated risk aversion in the credit market stemming from liquidity constraints because of the slowing economy and housing downturn kept the spreads widening in the last quarter of 2007. Spreads for both cash bond indices and credit default swap indices reflect much higher default rate expectations. Moreover, credit quality for speculative grade slipped in the second-half of 2007, with downgrades outpacing upgrades almost 2.5 to 1. Ms. Vazza added, "Deal flow in the primary market for speculative-grade bonds finished 2007 with a whimper and should remain tepid in the near term, with small bursts of backlogged bonds and stronger high-yield credits pushing through." The report is available to RatingsDirect subscribers who have upgraded their package to include the Global Fixed Income Research add-on. RatingsDirect is the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. If you are not a RatingsDirect subscriber with the Global Fixed Income Research add-on, please contact your local Standard & Poor's representative or [email protected] for further information. Ratings information can also be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. Members of the media may request a copy of this report by contacting the media representative provided. Media Contact: Mimi Barker, New York (1) 212-438-5054, [email protected] Analyst Contact: Diane Vazza, New York (1) 212-438-2760