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US High Yield Market Outlook and Positioning
Wednesday 17 April 2024
Investment Talks
US High Yield Market Outlook and Positioning
April 2024 | Although first-quarter returns proved to be anemic, at least they were consistent. Across the quarter, monthly returns were positive and spreads moved tighter. With inflation's decline stalling, short-term rate expectations stabilized. Within high yield, Treasury yield increases largely negated the effects of tighter spreads, leading to returns near the index's coupon yield. Although CCCs were the best performers in the US and globally, the US High Yield Distressed Index (comprised of issuers with spreads over 1000 basis points) underperformed the broader US high yield market, indicating investors were more interested in high-yielding bonds than in potential workouts.
01 | First-quarter high yield index performance was positive but unexciting as small price losses were offset by coupon income.
02 | Inflation data continued to drive the markets: During the first quarter, US Treasury bond yields increased as inflation figures surprised on the upside and growth remained strong.
03 | US Federal Reserve voters have firmly indicated cuts are coming: however, timing is dependent on inflation slowing, which is challenging with the US economy growing faster than expectations.
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