Consistent Income in All Markets

Tolerance for disappointment has worn thin.

Despite a strong start in 2023, the CCC ratings bucket has recently lost its momentum. The category has underperformed higher-quality rating cohorts since mid-September within both the high yield and leveraged loan indices by 315 and 138 basis points, respectively.¹

This relative weakness has accompanied signs of bifurcation among non-investment grade issuers. In the second quarter, earnings momentum slowed following elevated growth in recent years. The performance of CCC issuers saw the greatest divergence in...

Rising delinquencies and tightening lending standards could affect subprime consumers—and investors.

When two major U.S. credit bureaus reported results in late October, their management teams observed escalating pressure on consumers with lower credit scores. The culprit? Inflation-driven increases in food, gas, housing and other costs have put strains on consumer balance sheets. This has led to a decline in the U.S. personal savings rate and a rise in delinquencies on consumer loans. For example, the portion of subprime auto loans in delinquency for 60+ days, as tracked by Fitch Ratings, was...

While spreads have tightened within Europe’s periphery, that trend could continue in a soft-landing scenario.

As European inflation fears continue to cool, some investors are convinced that the European Central Bank (ECB) has completed its latest hiking cycle in line with a soft economic landing central scenario.

That outcome, in our view, could benefit bondholders aiming to profit from rolling down the yield curves in countries on Europe’s periphery, where grants and cheap loans—courtesy of the EU’s recovery fund (formerly the Recovery and Resilience Facility, or RRF)—may support...