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MarketScape · 06.17.24

Navigating High-Yield Credit Opportunities in a Resilient Market

High-yield credit is experiencing strong inflows and investor confidence, potentially offering attractive returns and reduced volatility compared to other risk assets.

  • Portfolio Construction
  • Fixed Income Insights
  • High Yield
  • Risk Management

Key Points

What it is

Our analysis examines high-yield credit opportunities, highlighting strong market inflows and investor confidence within a stable economic environment.

Why it matters

In the current market, high-yield credit offers attractive returns and reduced volatility compared to other risk assets, making it a compelling opportunity for investors.

Where it's going

Our evaluation suggests that the high-yield credit market is likely to experience ongoing expansion and resilience, fueled by strategic investment choices and improved corporate fundamentals.

Despite economic challenges and geopolitical concerns, the U.S. consumer remains resilient, strengthened by job creation, wage stabilization, and strong corporate fundamentals. While there are concerns about reduced spending among lower-income households, substantial job gains for this sector over the past two years have eased financial burdens, setting the stage for robust market activities and investment opportunities. Let’s take a closer look.


Primary market activity remains strong across asset classes, particularly in . Notably, we are not seeing increasing debt levels, as most new issuances are earmarked for refinancing. Management teams and treasurers recognize the high cost of debt and are focusing on organically enhancing fundamentals. Investor demand for high-yield credit is clear, with inflows this year, including a $6.7 billion inflow in May — the largest since last November.* This strong demand has exceeded supply, bolstering evaluations. As a result, high-yield credit remains a compelling choice for investors, offering strong total return potential alongside dampened volatility relative to other risk assets.


comprise about half of the high-yield market, so their performance significantly impacts the entire asset class. This year, investors increased their exposure to BB-rated bonds due to various risks, such as geopolitical, monetary, and fiscal challenges. The difference in spread between BB-rated and higher-rated bonds has narrowed, reflecting the growing confidence in BB-rated bonds. Even with the reduced spread premium, investors still favor BB-rated bonds for their potential to enhance portfolio construction and provide diversification benefits. Active management focused on bond selection and broader market strategies that take advantage of current trends are crucial for achieving risk-adjusted investment success. Furthermore, the financial health of companies issuing single-B bonds is improving, leading to rating upgrades and a positive outlook for this segment.


The market continues to offer attractive opportunities for investors. Even with inherent risks, the attraction of high yields and strong returns, coupled with lower volatility compared to other risk assets, remains significant. As companies strengthen their financial foundations, the market remains robust. Strong U.S. nominal growth supports a stable economic backdrop, allowing investors to explore opportunities with and practical portfolio construction.



*Source: EPFR

Main Point

High-Yield Credit Offers Compelling Investment Opportunities

High-yield credit is experiencing strong inflows and investor confidence, offering attractive returns and reduced volatility compared to other risk assets. We explore how improving fundamentals, along with strategic selection, continue to drive growth in this asset class.

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Eric Williams

Head of Capital Structure

Eric Williams is head of capital structure and a senior portfolio manager on the global fixed income team at Northern Trust Asset Management. He has broad oversight of our actively managed leveraged credit platform and is the lead portfolio manager on several leveraged credit strategies across the firm.

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Northern Trust Asset Management (NTAM) is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Fund Managers (Ireland) Limited, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc., 50 South Capital Advisors, LLC, Northern Trust Asset Management Australia Pty Ltd, and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company.


Issued in the United Kingdom by Northern Trust Global Investments Limited, issued in the European Economic Association (“EEA”) by Northern Trust Fund Managers (Ireland) Limited, issued in Australia by Northern Trust Asset Management (Australia) Limited (ACN 648 476 019) which holds an Australian Financial Services Licence (License Number: 529895) and is regulated by the Australian Securities and Investments Commission (ASIC), and issued in Hong Kong by The Northern Trust Company of Hong Kong Limited which is regulated by the Hong Kong Securities and Futures Commission.


For Asia-Pacific (APAC) and Europe, Middle East and Africa (EMEA) markets, this information is directed to institutional, professional and wholesale clients or investors only and should not be relied upon by retail clients or investors. This document may not be edited, altered, revised, paraphrased, or otherwise modified without the prior written permission of NTAM. The information is not intended for distribution or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. NTAM may have positions in and may effect transactions in the markets, contracts and related investments different than described in this information. This information is obtained from sources believed to be reliable, its accuracy and completeness are not guaranteed, and is subject to change. Information does not constitute a recommendation of any investment strategy, is not intended as investment advice and does not take into account all the circumstances of each investor.


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