High Yield Talking Points: Mid-year default wrap

Research evidence excerpt

High Yield Talking Points: Mid-year default wrap

J P M O R G A N Europe Credit Research

13 July 2026

High Yield Talking Points

Mid-year default wrap

Europe Corporate Credit - Strategy

Daniel Lamy AC

(44-20) 7134-0467

daniel.lamy@jpmorgan.com

Matthew Bailey

• European high yield default rates slowed in 1H26, with the annualised 6m (44-20)matthew.a.bailey@jpmorgan.com7134-2384

rate just 1.4%, and a 12m rate of 1.9%.

Samuel Hayani

• Lower default rates are a function of smaller credits being restructured, (44 20) 3493-4001

rather than a material slowing in the pace of default activity. samuel.hayani@jpmorgan.com

J.P. Morgan Securities plc

• Recovery rates continue to decline, falling from 52% to 48% in June. LTM

recoveries for unsecured bonds are down to 10%.

• The high yield distressed ratio increased 0.5% to 5.4% in June. Outside of

March, when index spreads were 50bp wider than today, this is the highest

reading since May-25.

• Retail and Chemicals saw the highest sector default rates in 1H26, at 6%

and 5% annualised respectively.

We added two bonds with a combined notional of €1bn to our list of European high

yield defaults in June, taking the first half total to €3.3bn from 7 issuers. On an

annualised basis, the H1 default rate was just 1.4%, down from 2.2% over 2H25.

The trailing 12m default rate has fallen sharply over the past year, from 4.0%

in Jun-25 to 1.9% at mid-year, though it was largely unchanged on the month.

However, this overstates the drop-off in restructuring activity: the issuer-weighted

rate only dropped by 0.3% over the same period, and now stands at 3.35%.

The reason for divergence between the two measures is that the size of defaulting

balance sheets has fallen lately, after being boosted in recent years by large capital