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Global High Yield – Under Pressure but Underlying Fundamentals Strong

Head of Fixed Income Strategists, EMEA
  • Global High Yield markets remained under pressure throughout April and into May as several factors combined to undermine investor comfort with the outlook for the sector. Specifically, the impact of persistently elevated inflation on corporate profit margins was a concern, along with the growth impact of tightening financial conditions.
  • There was also some distress in certain Healthcare and Retail issuers. With recession risk rising in the US, albeit from very low levels, as well as the slower growth outlook elsewhere, in China and eurozone particularly, the macro outlook remained challenging.
  • The high yield market did see a sharp rebound in the last week of May, as the elevated valuations and a peak in rates volatility attracted investors and enabled the market to retrace approximately 35% of the spread widening year to date.

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