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Weekly Market Summary

Jan 8 to Jan 12, 2024

View Current Performance

Extra Credit*

  • For U.S. interest rates, despite ongoing moderation in the labor market, solid real-income growth should continue to support activity. On the front-end of the yield curve, rates are likely to remain relatively pegged amid recalibration cuts, while long-end rates should continue to unwind last year's late decline.
  • Global bond markets have sold off modestly to start 2024, partially unwinding last year’s late rally. U.S. Treasury yields have moved higher, but elsewhere there has been larger repricing activity happening. Across the Atlantic, Gilts have sold off about 20 basis points due to supply concerns, and Bunds have followed suit due to front-end rates responding to the upside inflation surprises.
  • With yields at the healthiest levels in more than a decade, this should be a catalyst for total returns across credit. But ongoing demand will make excess returns harder to come by considering the rally in spreads across most markets in 2023.
  • New demand from non-traditional investment-grade credit investors has increased thanks to elevated yields and a robust economy. This has come on top of demand from more traditional investors such as lifers and pension funds. Most of this demand has been yield focused, with spreads being almost an afterthought if the issuer has been deemed “safe.”
  • Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished the month at 2.10% and 2.08%, respectively, up and unchanged from 2.01% and 2.08% in November. The 25-year historical default rate for loans and high-yield bonds is 3% and 3.4%, respectively.

Sources: Bloomberg and JP Morgan as of 1/9/24.

Yield as of:
Jan 12, 2023
High-Yield Bonds
Investment-Grade Corporates
Last Week
Prior Week
Start of the Year
Option Adjusted Spread as of:
Jan 12, 2023
High-Yield Bonds
Investment-Grade Corporates
Last Week
338 bps
497 bps
91 bps
Prior Week
353 bps
498 bps
97 bps
Start of the Year
323 bps
501 bps
93 bps
Prices as of:
Jan 12, 2023
High-Yield Bonds
Investment-Grade Corporates
Last Week
Prior Week
Start of the Year

*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.

Any discussion of individual companies is not intended as recommendation to buy, hold or sell securities issued by those companies. Aristotle Fund holdings can be found on the fund pages linked above.

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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