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Weekly Market Summary

Aug 28 to Sep 1, 2023

View Current Performance

Extra Credit*

  • Data over the past few weeks shows flows have moderated as the sell-off in rates has affected fixed-income demand. While nearly $4 billion flowed into fixed-income mutual funds and ETFs 8/1/23 to 8/25/23, more than half was invested in short-term government funds. This was a bit of an improvement from the prior week, but still well below the pace at the end of July, when funds had nearly $8 billion of inflows 8/1/23 to 8/25/23. Mortgage-backed funds saw particularly lackluster demand (at the third percentile over the past six months). Intermediate and long-term corporate bond funds and inflation-linked funds also posted notable outflows.
  • Mortgages continue to have a hard time finding their footing amid the heightened August volatility, typically underperforming alongside rate sell-offs. On a spread basis, option-adjusted spreads remain on the wider end of their one-month range across coupons and products. Concerns remain around the capacity for money managers to add mortgages, as sell-offs spur outflows and as they already maintain substantial overweight positions.
  • Gross high-yield issuance totals $110.8 billion thus far in 2023, up 37% year-over-year, while net, or ex-refinancing, volume of $40.8 billion is down -3% versus the same period a year ago. Notably, each month in 2023 has produced below-average issuance volume. Specifically, a monthly average of $14 billion and $23 billion of high-yield and bank-loan issuance, respectively, have been priced year-to-date, which compares to long-term averages of $26 billion and $39 billion, respectively. Notably, September has been the most active month for high-yield issuance over the past 13 years, averaging $34.1 billion of volume vs. the average of $25.6 billion over the past year. The two least active months are December ($15.4 billion) and August ($19.3 billion), and the most active months on a gross basis for loans are February ($55.7 billion) and March ($44.6 billion), while the two least active are July ($24.9 billion) and August ($30.4 billion).
  • The trailing 12-month default rates for bank loans and high-yield bonds, excluding distressed exchanges, finished the month at 2.24% and 1.29%, respectively, down from 2.33% and 1.18% from July. The long-term historical default rate for loans and high-yield bonds is 3.1% and 3.2%, respectively.

Sources: Bloomberg and JP Morgan as of 8/28/23.

Yield as of:
Sep 1, 2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
8.40%
10.89%
5.60%
Prior Week
8.65%
10.97%
5.69%
Start of the Year
8.96%
10.69%
5.34%
Option Adjusted Spread as of:
Sep 1, 2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
366 bps
522 bps
110 bps
Prior Week
380 bps
530 bps
110 bps
Start of the Year
469 bps
592 bps
121 bps
Prices as of:
Sep 1, 2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
$89.57
$94.74
$89.44
Prior Week
$88.77
$94.36
$89.14
Start of the Year
$86.22
$91.89
$89.37

*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.

Past performance does not guarantee future results. Index performance is not indicative of fund performance. Indexes are unmanaged and it is not possible to invest directly in an index.

Investors should consider a fund’s investment goal, risks, charges, and expenses carefully before investing. The prospectus and/or the applicable summary prospectus contain this and other information about the Fund and are available from AristotleFunds.com. The prospectus and/or summary prospectus should be read carefully before investing.

Investing involves risk. Principal loss is possible.

Foreside Financial Services, LLC, distributor.

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