Chart is for illustrative purposes only. Past performance is not necessarily an indication of future results. *High Yield is representative of the Bloomberg Barclays U.S. High Yield Index and EM debt is representative of the Bloomberg Barclays Emerging Markets Debt Index. See additional index disclosures in glossary.
The Middle East conflict continues but key credit spreads remain relatively subdued. Historically, rising credit spreads signal greater risk aversion and concerns about slowing growth. A sustained widening could indicate more persistent growth concerns.
Similar to the equity market, credit spreads suggest the conflict will likely be short-lived. Though U.S. high yield spreads rose 55 basis points (bps) and emerging market debt spreads increased 30 bps in the last two months, these levels are historically low. We agree with the market and believe the oil shock will be temporary. While recent developments from President Trump on potential negotiations could be positive, the situation remains dynamic, and we’ll continue to watch whether credit spreads widen further.
All investments involve risk, including the possible loss of principal. Certain investments have specific or unique risks that should be considered along with the objectives, fees, and expenses before investing.
Asset allocation and diversification cannot ensure a profit or protect against a loss.
Option Adjusted Spreads (OAS) is a bond’s yield premium over a risk-free benchmark, adjusted to remove the effects of embedded options like calls or prepayments so you can compare bonds fairly.
Bloomberg Barclays U.S. High Yield Index tracks the performance of U.S. dollar–denominated, non-investment-grade, fixed-rate, taxable corporate bonds issued by U.S. issuers.
Bloomberg Barclays Emerging Markets Debt Index is a broad benchmark covering fixed and floating-rate, U.S. dollar–denominated debt issued by sovereigns, quasi-sovereigns/agencies, local authorities, and corporates from countries classified as emerging markets under rules informed by World Bank and IMF classifications. It includes investment-grade, high-yield, and unrated securities, with principal and coupon payments in USD.
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