So as we most likely face further Federal Funds Rate increases this year, we feel investors should focus on the reason behind these rate moves: economic improvement. A stronger economy would undoubtedly be a positive from a credit perspective and we believe would likely indicate lower default rates, meaning likely improved credit prospects for the high yield issuers and the high yield market.

Disclosure Information

1. High yield bond default data and Federal Fund Rate data from Jantzen, Nelson, CFA and Peter Acciavatti, “JPM High-Yield and Leverage Loan Morning Intelligence,” J.P. Morgan North American Credit Research, 2/16/18, https://markets.jpmorgan.com, data used for the final month of each indicated quarter. GDP change data sourced from Bureau of Economic Analysis, U.S. Department of Commerce, www.bea.gov.

2. Jantzen, Nelson, CFA and Peter Acciavatti, “JPM High-Yield and Leverage Loan Morning Intelligence,” J.P. Morgan North American Credit Research, 2/6/18, https://markets.jpmorgan.com.

Although information and analysis contained herein has been obtained from sources Peritus I Asset Management, LLC believes to be reliable, its accuracy and completeness cannot be guaranteed. This report is for informational purposes only. Any recommendation made in this report may not be suitable for all investors.

As with all investments, investing in high yield corporate bonds and loans and other fixed income, equity, and fund securities involves various risks and uncertainties, as well as the potential for loss. High yield bonds are lower rated bonds and involve a greater degree of risk versus investment grade bonds in return for the higher yield potential. As such, securities rated below investment grade generally entail greater credit, market, issuer, and liquidity risk than investment grade securities. Interest rate risk may also occur when interest rates rise. Past performance is not an indication or guarantee of future results. The index returns and other statistics are provided for purposes of comparison and information, however an investment cannot be made in an index.