European companies have been tapping the high-yield bond markets in a big way this year as banks in the region have been tight when it comes to lending.

A favorable rate environment couple with banks’ unwillingness to provide capital to European companies has meant high-yield bond issuance there has nearly doubled this year , Matt Clinch reports for CNBC. With nearly a full month left in 2013, European companies have issued almost $76 billion in high-yield corporates, a 98% increase over 2012 levels, CNBC reported, citing S&P Capital IQ.

The flood of new European junk supply has not crimped the Market Vectors International High Yield Bond ETF (NYSEArca: IHY). The $119.3 million IHY is up 4% in the past six months despite heavy exposure to Europe and a pair of the region’s currencies.  [Junk Bond ETFs Still Luring Yield-Hunters]

Four of IHY’s top-six country holdings are European nations with the U.K., Germany and Italy combining for just over 30% of the ETF’s weight. Over 46% of the ETF’s 370 issues are denominated either in British pounds or euros.

European companies are issuing riskier bonds and the 12-month global speculative-grade default rate was actually increasing as investors were flocking to snap up these bonds, CNBC reported. That means some issuers have headed into “C” ratings to bring corporate bonds to market.  However, over 85% of IHY’s holdings are rated BB or B. [European Junk Bonds Equal Opportunity]

European and emerging markets junk bonds also have lower default rates than U.S. equivalents. From 1981 to 2011, the average default rate on U.S. and tax haven high-yield corporate debt was 3.46%, according to Market Vectors. For Europe and emerging markets junk bonds, the default rates were 1.75% and 1.55%, respectively.