April 2024: Outlook and Implementation
► April’s themes revolved around economic data consistent with growth and rate-induced volatility, which caused investors and the Federal Reserve (Fed) to rethink the timing of any rate cut cycle.
► April's 0.60% monthly gain was the smallest this year but outperformed fixed rate asset classes, including high yield (-1.00%), investment grade (-2.49%), and 10-Year Treasuries (-3.35%).
► Performance was entirely attributable to income (+0.76%), partially offset by softer prices (-0.16%).
► The YTD return of 3.07% also leads credit sectors and is on pace with our full-year target.
► Both retail and institutional demand are outpacing new loan issuance as M&A/leveraged buyout (LBO) financing remains limited. The firm tone and open capital markets allow borrowers to reprice loans and extend maturities.
► At a 9.8% yield to maturity, loans retain their coupon advantage, especially as rates stay higher for longer and the economy moves closer toward a soft landing or avoiding a recession altogether.
► Risk underperformed for the first time since October 20023, with CCC-rated loans down 0.68%. BBs returned 0.65%, mainly on coupon, and B risk returned 0.75%.
► Telecom-related industries underperformed, while healthcare, entertainment, and utilities outperformed.