How has high yield performed during recent market volatility?

When I think about high yield this year, what stands out is not that spreads haven't moved—they have—but that they've been far less volatile than equities, and less reactive than one might expect given the backdrop. We've seen sharp swings in equity markets and meaningful moves in government bond yields, yet credit spreads have remained relatively contained. Spreads have adjusted, but in a more orderly and measured way relative to other risk assets. That divergence is important. Equity and rate markets have been driven more by sentiment and macro uncertainty, while credit has remained anchored in fundamentals and income.

Higher yields and shorter duration are anchoring spreads

All-in yields in high yield are meaningfully higher today, which has improved the starting point for investors. That higher income may help provide a cushion, potentially reducing the need for spreads to adjust aggressively during periods of volatility. At the same time, the asset class has a shorter duration profile, making it less sensitive to changes in government bond yields. In a year where both rates and equities have been volatile, that combination of higher carry and lower duration has helped dampen spread volatility and keep moves more measured. Demand for income has also remained strong, which has helped anchor the market despite volatility elsewhere.

Higher quality is reducing sensitivity to shocks

The structure of the high yield market is stronger than it was in past cycles. There is less exposure to CCC-rated debt and less reliance on private issuers, both of which have historically been more reactive during periods of stress. In addition, a larger share of the market is in secured bonds, which generally sits higher in the capital structure. This improved quality mix has made spreads less prone to sharp widening, even when broader risk assets are moving more aggressively.

Stronger fundamentals are keeping credit anchored

Issuers are entering this period from a position of strength. Balance sheets are generally healthier, with more manageable leverage and solid interest coverage. Many companies also extended maturities during the low-rate period, reducing near-term refinancing pressure. Because of this, there has been less urgency for spreads to reprice wider, as default risk has not materially deteriorated. Even with ongoing macro uncertainty, the underlying credit picture has remained stable, which has helped keep spread volatility lower than what we've seen in equities and rates.

So, putting it all together, spreads have moved, but in a controlled way. And that may be a reflection of a stronger, more stable high yield market than what we’ve seen in the past.