Interest rate sensitivity drove returns during the month as higher-duration assets tended to outperform as 10-year Treasury rates fell.

Despite solid economic data and better-than-feared corporate earnings credit turned in mildly negative returns in May.

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 traded sideways for much of the month as inflation concerns and cryptocurrency market volatility weighed on sentiment.

HY Bonds and Senior Secured Loans each endured their worst month since 2008, ending down -11.76% and -12.37%, respectively, as the global rout in risk assets continued. Historically, credit markets have been resilient, performing well following sell-offs and rewarding investors for buying in at or near current spread levels.

Treasury rates fell following the Fed's dovish tone at their March meeting, boosting the more duration-sensitive Barclays Agg.

Benefiting from their floating rate coupon and position at the top of the capital structure, senior secured loan prices remained relatively steady in the face of rising short-end U.S. Treasury yields and a decline in U.S. equity prices.

Amid the emergence of significant regional and global bank stress, fixed income volatility spiked in March as the MOVE Index rose to levels last seen in 2008.

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.

Interest rate volatility continued to weigh on markets for much of the month.