Private Equity and Corporate Bonds

You are not being clear as to what you are specifically finding having a high correlation. I will guess that you found a correlation with companies controlled by private equity having High Yield bonds outstanding. This is because private equity uses leverage to enhance shareholder returns as the Capital Asset Pricing Model illustrates. Private equity never buys a company with 100% equity and always uses debt to finance 50% to 90% (occasionally higher) of the purchase price. This debt is either bank debt, public bonds or a combination of both.