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Weekly Market Summary

Sep 23 to Sep 27, 2024

View Current Performance

Extra Credit*

  • With greater confidence in the downward trajectory of inflation, interest rates have rallied swiftly over the past few months, with the 10-year Treasury roughly 80 basis points lower since May. In light of the rate rally, spreads have widened, with the Bloomberg US High Yield Index spread reaching 330 basis points on Sept. 10, its widest since February, excluding August's “carry trade unwind” fears.
  • Without any obvious catalyst between now and the election for option-adjusted spreads to gap wider, the demand for all-in yield will potentially lead any selloff in rates to be met with buyers of high-yield paper, keeping spreads tighter until there is greater certainty on the outcome of the presidential election. Therefore, expectations are for high-yield spreads to trade back to a 290-315 bps range over the next several weeks.
  • Flows into bond funds have held steady, though investors rotated out of U.S. Treasury funds and into broader fixed-income funds amid anticipation of the Fed rate cut last week. Japanese investor demand picked back up after a brief slowdown. Meanwhile, bank demand was again tepid.
  • Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished the month at 1.18% for high-yield bonds and 0.98% for bank loans, down and up from 1.40% and 1.16%, in August. 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 9/27/24.

Yield as of:
Sep 27, 2024
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
6.98%
9.56%
4.62%
Prior Week
7.21%
9.64%
4.68%
Start of the Year
7.59%
10.60%
5.00%
Option Adjusted Spread as of:
Sep 27, 2024
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
299 bps
471 bps
85 bps
Prior Week
301 bps
469 bps
91 bps
Start of the Year
323 bps
501 bps
93 bps
Prices as of:
Sep 27, 2024
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
$96.74
$95.63
$96.17
Prior Week
$96.71
$95.67
$96.14
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.

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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