Average yields on US junk bonds have topped 20 per cent for the first time amid rising concerns about a protracted recession and a wave of corporate defaults.

The spike in yields could have a dramatic impact on economic activity, making new debt prohibitively expensive for companies with credit ratings below investment grade. Such junk-bond issuers account for 17 per cent of the S&P 500 and nearly half the corporate bond market, according to Standard & Poor’s.