Despite some modest weakness in high yield during the second half of September, we believe credit remains on solid footing for the remainder of 2021.

Markets were gripped with volatility once again in September. Stubbornly high inflation, hawkish Fed rhetoric and poor earnings results in certain economic bellwether stocks weighed on markets with little reprieve.

Credit markets were mixed in September as investors increasingly accepted that rates may remain elevated for an extended period.

Strong corporate and economic data caused high yield bonds and senior secured loans to rally. High duration portfolios, like the Barclays Aggregate, continued to struggle amid rising rates. High yield bonds generated their strongest quarterly return since Q1 2017.

IG bonds have turned negative over the past 9 months while HY has moved higher. This week’s chart looks at the impact of duration as rates rise.

High yield bonds and senior secured loans may offer attractive yields and an appealing entry point compared to stocks.

With the Fed potentially pausing after a May rate hike, this week’s chart looks at credit returns after historical pauses in Fed rate hiking cycles.

See how spreads on corporate bonds have fared over the last 20 years, and why that might point to a prolonged search for income.

Our Investment Research Team examines what’s driving reactionary responses in the credit market.