Aggressive policy tightening by the Fed and ECB led to a sharp surge in yields, and this along with a risk off tone throughout most of 2022 translated into one of the worst years for global high yield.
Gross primary market activity decreased nearly fivefold in 2022 to a low since the financial crisis, amid significant market volatility. Defaults and fundamentals have been benign, and Europe has a wider range of possible outcomes due to binary risks.
Performance started to reverse and inflows started to resurface in 4Q, as inflation reached a peak across regions and started to come down, setting the stage for more moderate pace of rate hikes.
Yields at 9% provide a decent cushion to absorb any further periods of draw-downs and there appears to be a fair opportunity to deploy additional capital in phases during periods of weakness.