Who’s afraid of bond defaults?

Muharrem Aner | iStock/360 | Getty Images

As yield-chasing investors move further out the risk spectrum, covenants on loans and bonds have loosened, but it isn't clear whether investors need to worry.

Some are taking a "keep calm" approach.

"We are sympathetic to the worries surrounding the loosening of lending standards in the leveraged loan market. But we don't think this will drive corporate defaults higher in the near-to-medium term," Goldman Sachs said in a note last week.

Read More Why the strong dollar may sink junk bonds

For one thing, "covenant light" loans tend to fare better than "covenant heavy" ones, it said, citing data from S&P Capital IQ Leveraged Commentary & Data indicating that the cumulative default rate from 2008 to the present for "covenant-heavy" issuers is 19.0 percent compared with 10.3 percent for "covenant-light" ones.

"With fewer covenants to violate, 'covenant-lite' issuers were in a better position to weather the storm of the recession, which explains their outperformance in terms of defaults," it said.

But not everyone is convinced.

"New deals are different"

"Over the last six years, there haven't been many defaults, so you don't have a lot of good data to go on right now," said Steve Goldman, managing director at fixed income manager Kapstream Capital.

Read More Why ETFs may be the biggest bond worry

"The new deals don't look like the old deals," he said. "When things go bad, companies aren't forced into austerity measures and that historically has led to more defaults."

Default rates are currently in the low single digits, but that could change, he said, noting that many borrowers, especially in Asia, have floating-rate loans and could see their cost of capital rise sharply if interest rates rise. Currently, the U.S. speculative-grade default rate is around 1.5 percent, according to data from S&P, which expects it to rise to 2.7 percent by June 2015.

During the Global Financial Crisis, markets priced in default rates of as high as 20 percent, he noted, adding that Kapstream hasn't really invested in the high-yield segment and is unlikely to change tack in the current environment.

Read More Junk bonds aren't junky: Pimco

If relying on historical default rates rings a bell, it might be from the Global Financial Crisis, when the creators of mortgage securities relied on historical data showing mortgage default rates were typically low -- something that changed once lending standards deteriorated.

Indeed, data suggesting lower default rates for lower-covenant lending may be related to better-quality companies having more leverage in negotiations.

Read More Don't fight the ECB: Can you still find yield in Europe?

"In the U.S., lower-rated high-yield bonds normally have stronger covenant quality than higher-rated bonds, since investors demand more protection when lending to riskier credits," said Jake Avayou, senior covenant analyst at Moody's. But he noted covenant quality in North America has deteriorated "significantly" since 2013, although Asian protections have held up somewhat better.

But Avayou cited concerns over a recent issue from Geely Automobile, which had significantly weaker covenants than most Asian bonds.

It didn't contain covenants related to asset sales, which would typically require a company to reinvest proceeds within a certain time period for a specific purpose, according to a recent Moody's report. The issue also lacked a transactions-with-affiliates covenant which would require arm's-length deals to prevent sweetheart deals with related parties, the report noted.

Read More Is the long-expected high-yield selloff under way?

It isn't clear whether the missing covenants are a one-off for this particular deal, Moody's noted.

"These things tend to repeat themselves. You see a looser structure and people start repeating and that's how weakness develops," Avayou said.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1