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Global High Yield Update – Q3 2023

Executive Summary:

  • The much-feared global recessionary outcome not panning out, supportive supply technicals, and strong earnings has led to good performance for the asset class YTD.
  • Credit conditions tightening, high cost of capital and lack of strong support from inflows in the medium term remains a concern.
  • A longer, but shallower defaults cycle expected this time – N12M expected defaults for US HY at 3.0-3.5%, and EUR HY at 2.5%
  • At 438 bps, GHY spreads do not flag as cheap now - but total return-oriented investors need not position too conservatively in a short-duration asset class yielding 8.8%.

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