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Global High Yield Update - Q2 2023

  • Receding macro risks, fading bank credit issues, the opening-up of capital markets, and better-than-expected earnings all led to good performance over the second quarter and year to date.
  • Tightening credit conditions, hawkish central bank rhetoric and lack of strong support from inflows in the medium term remain as concerns.
  • A longer but shallower defaults cycle expected this time – the next 12 months (N12M) expected defaults for US HY are 3.5%, with EUR HY at 2.5%. 
  • At 450 bps, GHY spreads are not especially cheap, but it is expensive to be underinvested in a short-duration asset class yielding 8.5%.

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