INSIGHTS

High Yield & the Credit Cycle

US High Yield bond spreads peaked in Q1 2016 as a result of the selloff in commodities, led by oil. The credit cycle may be aging and may be appropriate to reexamine the role of high yield bonds throughout different phases of the economic cycle. This TOI seeks to examine the following:

  • The characteristics of high yield bonds relative to other fixed income investments and equities
  • Historical behavior of high yield bonds through various market environments
  • The current credit environment to contextualize potential future high yield performance

The economic recovery has been long in tenure, but the market environment remains supportive. Continue loose monetary policy and mild economic activity remains positive for high yield, which indicates that we may still be a ways out from a turn in the credit cycle.