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Weekly Market Summary
Jul 28 to Aug 1, 2025
Extra Credit*
- Spreads in both high-yield and investment-grade bonds remain tight, though high yield has decompressed a bit relative to investment grade. Within high yield, single-Bs screen as rich at the ratings level. Although single-Bs look rich overall, unsecured single-Bs appear cheaper. Secured single-Bs, which account for more than half of the cohort's par, have led the compression, while the spread of the unsecured group is currently in its 99th last-12-months percentile versus BBs.
- The Bloomberg US Aggregate Bond Index (Agg) has increased overweight to corporates. Corporates now account for 24% of the Agg, while tracking funds allocate 28.1% to corporates. Funds have become more overweight as corporates make up less of the index, but the current overweight is still far from the 2020 peak.
- Credit funds have underperformed in the recent rally. Year-to-date, Agg-benchmarked funds have outperformed by 43 basis points, while credit/corp funds have only matched their benchmarks. Over the past three months, credit/corp funds have underperformed their benchmarks, suggesting some under-investment amid the rally. Furthermore, fund performance dispersion has been muted versus last year, implying mutual funds have been hugging the benchmarks more than usual.
- While the underperformance is fairly shallow, it is broader compared to last year. The percentage of credit/corp funds lagging benchmarks rose from 22% in 2024 to 37% so far in 2025, though the average underperformance has narrowed. The wider breadth and recent underperformance suggest there might still be some "catch-up" buying to do, particularly on spread backups.
As of 7/29/25.
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.
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.
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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.
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