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Weekly Market Summary

June 3 to June 7, 2024

View Current Performance

Extra Credit*

  • Downgrades in high yield are trending at the same pace as 2023, but upgrades are increasing. Most downgrades in high yield this year have been repeat downgrades (on bonds that have already been downgraded at least once). This might be concerning since already-downgraded bonds are more likely to be downgraded again, and the spread reaction tends to be more severe for repeat than for first-time downgrades.
  • Year-to-date mergers and acquisitions (M&A) volumes are up 17% year-over-year, but activity has been concentrated among a few sectors. 2023 was one of the quietest years for M&A post-GFC. However, the market has been active to start the year, as the chance of recession has been largely removed from forecasts and inflation has declined from its peak. Deals thus far have been largely concentrated in tech, energy, financial blocker entities (fincos), real estate investment trusts (REITs), and pharma.
  • Barclays expects $1.8 trillion of M&A volumes in the next twelve months, up 15-20% year-over-year from current last twelve-month (LTM) volumes. Their revised top-down model also suggests that deal volume will pick up by 15-20% over the next year, as it has already been higher so far in 2024 compared with 2023. The recent uptick should persist, as conditions and optimism have improved and a very quiet 2023 has left a lot of pent-up deal activity.
  • Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished May both at 1.25%, respectively. This was compared to 1.32% and 1.55% from April, as the high yield default rate was 30 bps lower, and the loan default rate now sit at a 16-month low. The long-term historical default rate for loans and high yield bonds was 3.0% and 3.4%, respectively.

Sources: Bloomberg and JP Morgan as of 6/3/24.

Yield as of:
June 7, 2024
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
7.93%
10.30%
5.45%
Prior Week
8.00%
10.30%
5.47%
Start of the Year
7.59%
10.60%
5.00%
Option Adjusted Spread as of:
June 7, 2024
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
303 bps
470 bps
83 bps
Prior Week
308 bps
470 bps
80 bps
Start of the Year
323 bps
501 bps
93 bps
Prices as of:
June 7, 2024
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
$92.96
$96.10
$91.54
Prior Week
$92.69
$96.11
$91.31
Start of the Year
$93.07
$95.32
$93.70

*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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