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Weekly Market Summary

Nov 27 to Dec 1, 2023

View Current Performance

Extra Credit*

  • October new home sales declined 5.6% month-over-month to 679,000, alongside a 40,000 downward revision to the prior month. The print highlights slightly lower demand amid elevated mortgage rates. The median price for a new home decreased by 3.1% month-over-month in October, a second straight monthly decline. The median new home price is now $409,300, down $87,500 from a year ago.
  • Mortgages remain wide by historical standards, though that’s probably to be expected given the technical backdrop of Federal Reserve’s quantitative tightening, positive net supply, and bank runoff. While spreads appear fair, there could be a modest amount of tightening if the year progresses along some base case forecasts that have the Federal Reserve cutting rates sooner than some expect. For commercial mortgage-backed securities (CMBS), investors may see delinquencies grow in 2024 and rating downgrades accelerate, which poses a challenge to seasoned exposures.
  • Investment-grade corporate-bond spreads are expected to tighten in 2024. Look for credit fundamentals to hold up amid sluggish but positive growth. Also, yield-driven demand should remain strong with a notable pickup from overseas investors, while supply should decline modestly led by non-financials shying away from high coupons. The key risk is simply valuations as tight spreads don’t leave much cushion for unforeseen negative catalysts.
  • Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished the month at 1.89% and 1.76%, respectively, down and up from 1.90% and 1.32% from September. The long-term historical default rate for loans and high yield bonds is 3.1% and 3.2%, respectively.

Sources: Bloomberg and JP Morgan as of 11/27/23.

Yield as of:
Dec 1, 2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
8.35%
10.90%
5.40%
Prior Week
8.61%
10.91%
5.74%
Start of the Year
8.96%
10.69%
5.34%
Option Adjusted Spread as of:
Dec 1, 2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
374 bps
526 bps
97 bps
Prior Week
375 bps
526 bps
102 bps
Start of the Year
469 bps
592 bps
121 bps
Prices as of:
Dec 1, 2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
$90.39
$94.52
$90.90
Prior Week
$89.35
$94.51
$89.03
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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