Market commentary

Credit markets were mixed last month. High yield built on its July rally in the first half of the month before surrendering those gains, ending August down -2.83%. Floating rate senior secured loans ended August up 1.54%.

There was a remarkable rally last month as second quarter earnings results were better than feared and markets appear unconvinced that the Fed will be able to hike rates as aggressively going forward, especially given signs of a slowing economy.

Volatility roared back in June. High yield bonds lost -6.8%, their worst month of 2022, while loans were down -2.16%. This marked the first back-to-back monthly declines of greater than 2% for loans since 2008.

This year’s credit market dynamics reversed course sharply in May. Senior secured loans declined as long-term interest rates and rates volatility fell last month.

Markets continued to grapple with volatility in April, as rising interest rates and broader macroeconomic uncertainty sent most major asset classes sharply lower.

Sharply higher interest rates, geopolitical tensions, a volatile commodities complex, inflation, and the ultimate course of the Fed’s tightening cycle have caused volatility for much of the quarter as markets have been forced to quickly recalibrate expectations given these rapidly evolving situations.