April 2023 | High yield market conditions opened January on a positive note, with decreasing yields and tightening spreads as investors put cash balances to work that had grown over the year-end holidays. The release of US December inflation figures in mid-January furthered the narrative of inflation coming under control, fueling market optimism. However, the release of the January inflation figures in February had the opposite effect, with slower declines in inflation provoking statements from US Federal Reserve officials that rates would need to remain higher for longer, thus depressing markets.
01 | First quarter high yield performance was strong but volatile: The ICE BofA US High Yield and Global High Yield Indices showed very strong gains through early February with total returns exceeding 5%, then faded, yet closed the quarter +3.72% and +3.3%, respectively.
02 | Defaults remain low: Monetary policy works with lags. The banking problems will reduce credit creation. We expect defaults to rise as the effects of both work through the system.
03 | We remain cautious on risk: While spreads are reasonable on a long-term basis, we believe credit spreads are likely to widen as recession effects become more widespread.
Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of April 12, 2023. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi US and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. Amundi Asset Management US is the US business of the Amundi Asset Management group of companies.
1. First quarter high yield performance was strong but volatile: The ICE BofA US High Yield and Global High Yield Indices showed very strong gains through early February with total returns exceeding 5%, then faded, yet closed the quarter +3.72% and +3.3%, respectively.
