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Weekly Market Summary

May 6 to May 10, 2024

View Current Performance

Extra Credit*

  • Investment grade corporate bond dollar prices have declined substantially amid the recent rate sell-off. April posted one of the largest historical dollar price declines in long-end investment grade, falling nearly $5 month-over-month. Spread compensation per dollar (basis points or bps/$) has also declined. At the same time, the compensation in spread terms for moving into higher-dollar-price credits has fallen year-to-date by 0.2 and 0.3 bps/$ in single-As and BBBs, to respective lows of 0.1 and 0.2 bps/$.
  • Investment-grade corporate bonds: AAA corporate bonds were down -1.69% vs. -2.50% for BBB corporates, as lower quality credit was one of the main drivers for the month’s performance. Duration was another driver for return in the month, as short-duration investment-grade corporate bonds were down -0.24%, 5-10-year investment-grade corporate bonds were down -2.34%, and long investment-grade corporate bonds were down -4.89%.
  • High yield bond recovery rates have improved. Recoveries for both secured and unsecured bonds have risen from cycle lows, and unsecured recovery rates are their highest since August 2022. Improving recoveries, combined with defaults that should be fairly contained for the remainder of 2024, should give investors greater confidence to move from secured bonds into unsecured.
  • High-yield bonds: The asset class saw risk underperform quite significantly, as BB high-yield returned -0.93% vs. -2.38% for CC and below high-yield corporates. The month also saw longer duration names underperform, as long-duration high yield underperformed the broad index for the month by -2.61%.
  • For bank loans, staying on trend with the first quarter, investor demand continues to outpace net supply and, as a result, the technical imbalance that grew last year continues to widen. This demand is binary due to CLO issuance combined with cash inflows/outflows at retail investor loan funds. The par amount outstanding tracked by the Morningstar LSTA index grew by $11.3 billion in April, the highest monthly increase since April 2022, reversing $9.8 billion cumulative decline in the first quarter. As of April 30, the size of the index was $1.401 trillion, up a modest $1.4 billion from the end of 2023.
  • Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished the month 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% and 3.4%, respectively.

Sources: Bloomberg and JP Morgan as of 5/6/24.

Yield as of:
May 10, 2024
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
7.92%
10.27%
5.50%
Prior Week
7.85%
10.34%
5.47%
Start of the Year
7.59%
10.60%
5.00%
Option Adjusted Spread as of:
May 10, 2024
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
298 bps
469 bps
82 bps
Prior Week
293 bps
475 bps
81 bps
Start of the Year
323 bps
501 bps
93 bps
Prices as of:
May 10, 2024
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
$92.79
$96.19
$91.01
Prior Week
$92.86
$96.06
$91.01
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.

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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