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.

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

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

Leveraged credit declines in May | Prices decline to two-month lows despite stable fundamentals

Steps to reopen the economy and progress toward a COVID-19 vaccine created an optimistic sentiment for much of the month, as HY Bonds, Senior Secured Loans and structured products posted strong returns. Interest rates remained relatively rangebound and the duration-sensitive Barclays Agg had a slight gain.

Credit rallied amid broad market strength in November on news of multiple potentially viable COVID-19 vaccines.

Credit markets declined in November. Loans returned -0.16% while HY bonds were down -1.02%, their second monthly decline and worst performance since March 2020.

Markets broadly rallied once again in November on early signs inflation may be cooling and the Fed may soon slow its aggressive pace of rate hikes.

Despite positive equity returns for the month, fixed income markets signaled a risk-off view as credit markets declined and the 10-year Treasury rate fell.

Leveraged credit rose in November, with loans outperforming HY Bonds. The duration-sensitive Barclays Agg was unable to recover from an early-month rate spike, ending down slightly on the month.