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Weekly Market Summary

Mar. 13 to Mar. 17, 2023

View Current Performance

Extra Credit*

  • Over the past week, high-yield bond spreads widened the most since July and the second most since the pandemic (March 2020) due to turmoil in the U.S. regional and European banking sectors. For context, the past week included the sharpest decline in 2-year Treasury yields since 1987 and the sharpest steepening of the yield curve since the early 1980s as investors quickly recalibrated Federal Reserve expectations.
  • The implied default rate for high-yield spreads (533 basis points) is 3.4%, which is slightly above the markets 3% 2023 default forecast. The 25-year average default rate for BB, B, and CCC-rated bonds is 0.7%, 2.6%, and 6.7%, respectively. This is compared to implied default rates—based on current spreads—of 1%, 2.7%, and 6.1%, respectively.
  • The implied default rate for bank loans with a spread of 575 basis points is 4.6%, which is above the markets 3.5% 2023 default forecast.
  • The trailing 12-month default rate for high-yield bonds and bank loans finished February at 2.12% and 2.26%, respectively, well below their respective long-term average of 3.2% and 3.1%

Sources: JPMorgan. Data as of 3/17/23.

Yield as of:
Mar. 17, 2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
8.98%
10.78%
5.18%
Prior Week
8.83%
10.57%
5.32%
Start of the Year
8.96%
10.69%
5.34%
Option Adjusted Spread as of:
Mar. 17, 2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
509 bps
578 bps
146 bps
Prior Week
450 bps
544 bps
126 bps
Start of the Year
469 bps
592 bps
121 bps
Prices as of:
Mar. 17, 2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
$86.76
$92.19
$91.15
Prior Week
$87.00
$93.35
$90.43
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.

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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