Global High Yield Year in Review
Performance/Market Highlights of 2024:
Global High Yield saw a surprisingly good year in 2024, with spreads tightening by 77 bps overall. Despite periods of intermittent volatility in August and September triggered by weak data releases in the US, investors held on to their “risk on” sentiment in the wake of strong corporate earnings, still resilient growth — particularly in the US, and global inflation that had largely continued tracking downwards.
Both the strong carry in rates and outright spread compression aided total returns for the year. Lower quality maintained its significant lead for the year in excess return terms (BB: 4.8%, Single-B: 5.2%, CCC & Lower: 14.0%). All industries were up on the year in excess return terms — with the highest from Real Estate (14.2%), which saw a sharp bounce back from 2023’s underperformance, and Healthcare (7.4%). Gross issuance in 2024 for US HY totalled $289.4bn, and for EUR HY they totalled €118.6bn — even though these numbers are ahead of equivalent 2023 values, 2024 has been only an average year for primary market activity, if we look at past 5 years in aggregate. Net issuance numbers come out to be quite a bit smaller, at $78.9bn for US HY and €3.1bn for EUR HY.
US HY Realized default rate was 1.5% L12M, and YTD’s US HY defaults/distressed exchanges of just $17.2bn ranks as among the lowest annual total on record. EUR HY defaults have seen a sharp pickup from ultra-low levels of 2023, following a handful of large capital structures defaulting — with L12M par default rate moving to 3.5%. Rising stars have significantly outpaced fallen Angels YTD in US HY($38.1 bn vs 10.0 bn), aiding further to the supportive technical of strong fund flows — both in US HY (+$16.4bn YTD) and EUR HY (+€12.4 bn YTD).