18 July 2025
KEY TAKEAWAY
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Past results are not a guarantee of future results
Data as at 31 May 2025. Source: Bloomberg.
There are reasons to believe structural changes in the high yield market have made it more resilient to shocks and it appears well positioned to continue to deliver strong results in the future. These strengths also partially explain why spreads have been trading at relatively tight levels compared to long-term historic averages and can continue to do so absent an external shock.
Since the global financial crisis (GFC), companies have been more disciplined in how they use debt. As a consequence, the quality of companies within high yield (HY) indices has improved. Today, more than 50% of the index is rated BB, the highest credit quality segment within high yield.
The maturity profile is also manageable. A substantial portion of the maturities for 2025 and 2026 have already been addressed, with less than 5% of the HY market expected to require refinancing by end of year.
Since ‘Liberation Day’ in early April 2025, dispersion within the high yield market has surged to levels we have not seen in the past five years. This is creating multiple opportunities for active managers to capture value.
Edward Harrold is an investment director at Capital Group. He has 18 years of industry experience and has been with Capital Group for 11 years. He holds a bachelor’s degree with honours in international relations from the London School of Economics. He also holds the Chartered Financial Analyst® designation. Edward is based in London.
Alvaro Peró Gala is an investment director at Capital Group. He has six years of investment industry experience and joined Capital Group in 2024. He holds an MBA from INSEAD, France, and holds both a master`s and bachelor's degree in industrial engineering from the Universidad Politécnica de Cataluña. He also holds the Chartered Financial Analyst® and Chartered Alternative Investment Analyst℠ designations. Alvaro is based in London.
