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Weekly Market Summary
July 29 to Aug 2, 2024
Extra Credit*
- Investment-grade cash index volumes increased 19% year-over-year in 2024, while volumes for all investment-grade corporate bonds increased 21%. High levels of concentration among the top 50 tickers continued in 2Q24. With the large rise in trading volumes, turnover increased in most sectors, most notably financial companies, pharma, retail and apartment REITs, and autos.
- High-yield cash volumes also increased in 2024, with volumes up 13% year-over-year. The size of the index has stayed flat this year following two straight years of contraction, as the rapid increase of rising stars seen in 2022-23 has slowed. As a result, turnover has reached post-COVID highs, increasing from 1.4x to 1.6x. The increase has been consistent across all ratings buckets.
- Portfolio trading gathered significant momentum in the first half of 2024. April was a record month for portfolio trading, with volumes of $110 billion, which represented 14% of total corporate-bond volume for the month.
- Trading volumes for leveraged loans picked up steam as well, increasing 7% year-over-year. Index turnover increased to 0.6x from its post-Global-Financial-Crisis low of 0.5x. Meanwhile, bid-ask spreads continued to narrow amid strength in loan prices, with the median bid-ask tightening to $0.50, the tightest since February 2022.
- CLO trading volumes were up 25% from the first half of 2023, and turnover also increased, with robust volumes for investment-grade CLOs and slightly above average volumes for non-IG CLOs. The increase in trading activity has occurred as the CLO market continues to grow, with the asset class gaining support from a broader array of institutional investors, including CLO ETFs.
- Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished June at 1.17% for high-yield bonds and 1.09% for bank loans, both down from 1.25% in May. This is also well below the long-term historical default rate of 3% for loans and 3.4% for high yield, and the historical post-GFC default rates of 2.3% and 2.5%, respectively.
Sources: Bloomberg and JP Morgan as of 7/29/24. Bloomberg indices referenced. Portfolio trading involves trading a basket of bonds of variable credit quality and risk as a single, all-or-none transaction, whereby the trade instruction specifies that the entire order must be filled.
Previous reports
*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.
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