HY Market Weekly Minutes: Resilience Meets Optimism as Spreads Tighten (January 21, 2025)
A Brief Recap of Last Week's High Yield Market Performance
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The numbers tell the story: high yield just posted its biggest weekly gain (+0.80%) in four months. While everyone’s focused on Treasury volatility and Fed speakers, the riskiest part of the credit market is actually outperforming. Even more telling: five issuers raised $2.8 billion in a single day last week—not waiting for “perfect” conditions, but jumping in with Treasury yields near 4.6%.
The catalyst? December’s inflation data came in notably below forecasts, with core CPI dropping from 3.3% to 3.2% year-over-year. But the real story isn’t the numbers—it’s how the high yield market is responding to them. While economists debate the timing of rate cuts, deals are getting done at levels nobody expected.
So while investment committees are wringing their hands about macro risks, the high yield market just keeps grinding higher. CCC bonds are outperforming, new issues are trading up (every single one of them), and fund outflows aren’t denting technicals. When you see that kind of divergence between narrative and price action, it’s usually the market that has it right.
Let’s break down what’s really happening.
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