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Weekly Market Summary

May 28 to May 31, 2024

View Current Performance

Extra Credit*

  • The Treasury market has seen a significant increase in issuance, with the 3-month moving average of Treasury supply rising from $181 billion to $230 billion in 10-year Treasury equivalents since August 2023. The Treasury does not anticipate additional increases to coupon auction sizes for at least the next “several quarters,” potentially suggesting duration supply should stabilize at these levels.
  • The Treasury should begin to lean more heavily on coupons to create borrowing capacity, especially as T-bills currently represent 21.8% of total marketable Treasury debt, above the recommended15-20% range. This might all suggest a potential shift towards increasing coupon sizes over time, although there have been recent discussions about revising the optimal T-bill share upwards to accommodate this shift.
  • Amid continued growth resilience and persistent inflation, there has been a continued shift in policy signaling as central banks continue to remain on hold and not tightening further. Speakers noted that despite varying post-pandemic consumption and investment dynamics in Europe, UK, Canada, and the US, developed market rates are broadly anticipating similar cumulative cuts. In the US, the Fed is still comfortable with guidance toward an eventual easing cycle. In Europe, speakers saw a legitimate case for earlier easing by the European Central Bank (ECB) on the back of weaker demand; even if the Fed has not started cutting, as any policy gap would likely not be significant enough to drive a large exchange impact. In Japan, the only developed market that is hiking rates, panelists noted that there’s been concern around the impact of higher Japanese Government Bond (JGB) yields on overall demand for US Treasuries. 
  • Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished April at 1.32% and 1.55%, respectively, compared to 1.86% and 1.67% from March. The long-term historical default rate for loans and high yield bonds was 3.0% and3.4%, respectively.

Sources: Bloomberg and JP Morgan as of 5/28/24.

Yield as of:
May 31, 2024
High-Yield Bonds
Investment-Grade Corporates
Last Week
Prior Week
Start of the Year
Option Adjusted Spread as of:
May 31, 2024
High-Yield Bonds
Investment-Grade Corporates
Last Week
308 bps
470 bps
80 bps
Prior Week
300 bps
470 bps
82 bps
Start of the Year
323 bps
501 bps
93 bps
Prices as of:
May 31, 2024
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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