Alternative Credit Letter

High Yield bonds delivered a modest total return of 0.28% in April. This was supported by a 30 basis points rally in Bunds and a solid 0.4% carry, which helped counterbalance a 36 basis points widening in spreads and a larger excess return loss of 0.8%. The performance reflects a partial rebound from the early-April […]

In March 2025, there were no defaults in the European high yield market. However, several companies have moved forward with recapitalization plans and will be incorporated into default rate metrics in the coming months. If the trade war continues to escalate and primary markets remain closed for a prolonged period, it could present challenges for

Despite relatively low overall default rates in the high-yield and syndicated loan market in 2024, a record-breaking 35% of defaults and distressed exchanges involved companies with prior defaults. This surge in repeat defaults stems from several factors. Higher interest rates have significantly increased borrowing costs, especially for financially precarious firms. Many companies that underwent distressed

Default and LME (liability management exercises) activity began 2025 on a quieter note, recording the lowest default and distressed exchange volume for a calendar month since December 2022. However, December saw elevated activity, and three- and six-month rolling totals remain high. We expect a slight moderation in high-yield bond and leveraged loan defaults in 2025,

The rise of Liability Management Exercises (LMEs) among high-yield issuers has primarily been driven by covenant-lite structures. These conditions allow managers reallocate assets, modify terms, and exchange instruments, also leading to a large increase of “distressed exchanges” (where troubled issuers offer bondholders reduced-value securities for existing bonds). This helps ease financial distress and avoiding an

Year to date, the US leveraged debt market posted strong performance, with returns of 8.3% in the leveraged loan (syndicated bank loans) segment and 8.7% in high yield bonds. In contrast to previous years, the short-term maturity profile of the leveraged loan market is heavily weighted toward lower-rated issuers (single B’s/CCC’s) compared to the high

Leveraged loans delivered one of the strongest gains of the year during October, outperforming the high yield market by 1.45%. The month was marked by heavy CLO issuance, robust primary market activity, and substantial fund and ETF inflows. A sectoral breakdown reveals that telecommunications was the only positive performer in the high yield market, whereas

U.S. homeowners’ equity has reached a historic high, with $ 35 trilion, serving as a substantial financial backstop for the economy in the event of a recession. In such a scenario, homeowners have the option to refinance their mortgages and tap into this equity as a financial cushion (vs. U.S. GDP value of $ 27

Historically, bank spreads have typically traded wider than those in the broader corporate market. However, this gap has almost disappeared, driven by the positive dynamics and performance within the banking sector since the European Central Bank started the hiking rate cycle in 2022. EUR IG Sr Financial spreads (see blue line in graph) are now

The global economy has to deal with higher structural inflation forces driven by aspects such as geopolitics (i.e. new tariffs, near-/on-shoring), energy transition, demographics or elevated fiscal spending. However, over the next 12 months, the US inflation could tame somewhat towards 2.5% as service inflation is expected to cool. This current disinflation trend is expected