HY Market Weekly Minutes: Market Rebounds as Fed Pivot Hopes Reignite (January 6, 2025)
A Brief Recap of Last Week's High Yield Market Performance
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Welcome back, and happy 2025! The high yield market started 2025 on a strong note, shrugging off December’s hawkish Fed surprise to deliver broad-based gains. Spreads compressed another 6bps to 274bps while the overall index gained +0.40% amid renewed optimism around potential rate cuts. The technical backdrop proved particularly resilient even as Treasury volatility remained elevated, with CCCs continuing their winning streak by outperforming higher-quality bonds for a ninth consecutive month.
The market’s risk appetite was especially evident in the performance data, with lower-quality credits leading the charge. CCCs posted gains of +0.51%, outpacing both Bs (+0.43%) and BBs (+0.36%) as investors looked past near-term rate uncertainty to focus on carry opportunities.
Primary markets remained dormant in the first week of 2025, typical for the start of a new year. However, with full-year 2024 issuance exceeding $278 billion—up significantly from $176 billion in 2023—and forecasts calling for another robust year ahead, the technical picture appears poised to remain robust. Major banks are projecting 2025 issuance in excess of $300 billion as M&A activity potentially accelerates under the new administration.
Let’s dive in.
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