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Weekly Market Summary

Jul 10 to Jul 14, 2023

View Current Performance

Extra Credit*

  • Fallen angel volumes total $12.5 billion year-to-date and are not expected to increase meaningfully by year-end. Fallen angel volume is still below 2022 levels and well below 2007 levels leading into the Global Financial Crisis. Without a near-term catalyst to drive the US into recession, the increased risk of high-yield downgrades is pushed further into the future.
  • Several supportive factors can keep high-yield bond option-adjusted spreads contained for the rest of 2023, including a strong economy and low unemployment. The S&P 500 has returned approximately 19% year-to-date and market participants have revised expectations for the index to finish the year higher than anticipated. Additionally, the "higher for longer" rates narrative has taken hold and the futures market is  pricing in no cuts until the first quarter of 2024. While this should keep pressure on issuers and points to general spread weakness, a healthy appetite for yield buying remains. In the first half of the year, 9% served as a de facto resistance level for all-in yields.
  • The job market has remained tight due to the enduring consumer spending. This tightness is illustrated by the job openings to unemployed ratio that is currently 1.6x and markedly down from the 2.0x post-COVID peak, but still much higher than at any point since at least 2003.
  • The trailing 12-month default rates for bank loans and high yield bonds, excluding distressed exchanges, finished the month at 2.41% and 1.64%, respectively, up from 2.41% and 1.49% from May. 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 7/13/23.

Yield as of:
July 14, 2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
8.31%
10.88%
5.36%
Prior Week
8.72%
11.00%
5.59%
Start of the Year
8.96%
10.69%
5.34%
Option Adjusted Spread as of:
July 14, 2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
379 bps
531 bps
115 bps
Prior Week
397 bps
544 bps
115 bps
Start of the Year
469 bps
592 bps
121 bps
Prices as of:
July 14, 2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
$89.68
$94.26
$80.95
Prior Week
$88.29
$93.86
$89.56
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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