Merrill Lynch High Yield Master II
Encyclopedia
The Merrill Lynch US High Yield Master II Index (H0A0) is a commonly used benchmark
index for high yield
corporate bonds
. It is administered by Merrill Lynch
. The Master II is a measure of the broad high yield market, unlike the Merrill Lynch BB/B Index, which excludes lower-rated securities.
, who then headed Merrill Lynch
's head of high yield bond research department, brought a problem to the attention of Phil Galdi, who was responsible for bond indexes. The existing High Yield Master Index excluded two types of issues that were becoming popular because of the boom in leveraged buyout
financing, zero-coupon bonds and payment-in-kind (PIK) bonds. Galdi's solution was to maintain the existing rules for the Master Index, but to create a new index that included "zeros" and PIKs. The new Master II was introduced with retroactive data that extended its history back to August 31, 1986.
Benchmarking
Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. Dimensions typically measured are quality, time and cost...
index for high yield
High-yield debt
In finance, a high-yield bond is a bond that is rated below investment grade...
corporate bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
. It is administered by Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
. The Master II is a measure of the broad high yield market, unlike the Merrill Lynch BB/B Index, which excludes lower-rated securities.
History
The High Yield Master II Index came into being in 1989. Martin FridsonMartin Fridson
Martin Steven Fridson is an eminent American investment thinker known for his application of rigorous financial theory to the field of high yield bonds. He is also a philanthropist and prolific author in the subjects of financial reporting, financial history, and political economy...
, who then headed Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
's head of high yield bond research department, brought a problem to the attention of Phil Galdi, who was responsible for bond indexes. The existing High Yield Master Index excluded two types of issues that were becoming popular because of the boom in leveraged buyout
Leveraged buyout
A leveraged buyout occurs when an investor, typically financial sponsor, acquires a controlling interest in a company's equity and where a significant percentage of the purchase price is financed through leverage...
financing, zero-coupon bonds and payment-in-kind (PIK) bonds. Galdi's solution was to maintain the existing rules for the Master Index, but to create a new index that included "zeros" and PIKs. The new Master II was introduced with retroactive data that extended its history back to August 31, 1986.
See also
- Martin FridsonMartin FridsonMartin Steven Fridson is an eminent American investment thinker known for his application of rigorous financial theory to the field of high yield bonds. He is also a philanthropist and prolific author in the subjects of financial reporting, financial history, and political economy...
- Zero-coupon bond
- PIK Bond