The European high yield market concluded 2025 with a notional default rate of 3.2%, representing a slight reduction compared to the previous year. A significant trend within the data is the robust recovery rate, which reached 62% in 2025, well above the long-term median of 41%. This high recovery level effectively limited the actual loss rate to 1.2%, demonstrating that even as defaults increased, the structural protection for creditors remained high.
For the second consecutive year, Financial Services emerged as the most distressed segment, posting a 17% default rate primarily attributed to the underperformance of debt servicing firms. While both Telecommunications and Construction & Materials registered default rates of 8%, the significantly larger market capitalization of the Telecommunications sector resulted in a disproportionately higher impact on the overall market default figures.
