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Weekly Market Summary
Apr 28 to May 2, 2025
Extra Credit*
- The BBB/A ratio has recently decompressed, reaching its widest level since October, and long-end BBB yields are near their highest level post-GFC. Historically, forward total returns from these starting levels tend to be strong vs. the asset classes long-term average given elevated price and yield contributions to total return.
- With long-end BBB yields between 6.0% and 6.5%, median forward three-month total returns are nearly 2%, 12-month returns are around 6.5%, and investors have negative total returns only 16% of the time when holding for a year.
- We are still in early innings of decompression in the high-yield bond market. Though the unsecured/secured basis has widened post-“Liberation Day” on April 2, it is still well below levels typically reached in periods of credit stress.
- Secured paper continues to have never-before-seen levels of influence on the U.S. high-yield market. 36% of index market value is now secured and over 50% of single-B market value. Recoveries on secured bonds are also at cycle highs, though this is a backward-looking measure.
- Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished the month at 1.24% and 0.27%, down from 1.26% and flat from 0.27% in February. This is also well below the long-term historical default rate of 3% for loans and 3.4% for high yield, and the historical post-GFC default rates of 2.3% and 2.5%, respectively.
Sources: Bloomberg and JP Morgan as of 4/28/25.
Previous reports
*Source: Morningstar®, Bloomberg, Credit Suisse. OAS is Options Adjusted Spread. 4-year discount margin is used for spread for bank loans. Yield quoted is yield-to-worst or equivalent calculation. YTD Low / High for yields are based on end of week and not intraday movements. Indexes and sub-indexes: Investment-grade corporates represented by Bloomberg US Corporate Bond Index. High-yield bonds represented by Bloomberg US Corporate High Yield Index. Bank loans represented by Credit Suisse Leverage Loan Index. The red and green arrows depicted under Yields, Option Adjusted Spreads, and Prices indicate a higher or lower value from the previous week.
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