May 2024: Outlook and Implementation
► The U.S. high yield market had its best performance in 2024, gaining 1.1% due to a supportive macro environment, strong earnings, the largest retail inflows since November, and open capital markets. Moderate inflation data and resilient labor reports provided a favorable economic backdrop, with 5-year and 10-year U.S. Treasuries lower by 21 basis points (bps) and 18 bps, respectively.
► Meanwhile, the stronger growth environment is having a positive impact on corporate profits, with companies beating expectations and increasing guidance at a high rate. The favorable risk environment contributed to large inflows, which contributed to the strong market performance.
► Higher-quality credits outperformed in response to the rate move as BB, B, and CCC credits gained 1.21%, 0.97%, and 0.44%, respectively. Spreads widened seven basis points to 308 bps, and excess returns were 0.1%. The yield-to-worst (YTW) decreased from 8.1% at the end of April to 8% at the end of May.