Defying expectations

Question: What were the key moments in high yield in 2023?

Mark Durbiano: High yield actually had a very strong 2023. Both the returns for high-yield bonds and leverage loans are pushing into the double-digit range, and that was, quite frankly, much stronger than we thought they would be when the year started. We had thought the economy would be a little weaker, but the economy has turned out to be very resilient here in 2023. Really supported by a strong consumer. Employment has been very strong, and the consumer has shown a tremendous willingness to spend money on experiences which has really helped the service side of the economy. So while we thought the economy was going to weaken into 2023, it's actually been very strong and resilient and that's generated very strong returns. Couple speed bumps along the way. Back when the mini banking crisis happened in March, we saw spreads widen pretty aggressively. And then again, when the equity markets weakened in October, we also saw spreads widen pretty aggressively. But those tended to be very short-lived, and the market rallied back very strongly. Now, default rates have increased a bit here in 2023, but not to any great extent that negatively impacted the overall market.