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.

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.

Driven by stronger than expected economic data in June, credit markets turned higher as senior secured loans returned 2.26% while high yield bonds returned 1.63%.

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.

The duration-sensitive Barclays Agg posted its third positive return of the year in June as long-term interest rates declined slightly.

Leveraged credit rebounds in June | HY Bonds benefit from repriced rate expectations

High yield bonds and senior secured loans gain in June. Yield curve flattens on rising rate expectations.