July 2024: Outlook and Implementation
► The U.S. high yield market rally continued, returning 1.94% as the market soared. Treasury yields had a large move lower as inflation data continued to improve.
► June inflation data surprised to the downside, which opened the door for rate cuts to begin as early as the September meeting. This contributed to a large decline in Treasury yields, with 5- and 10-year U.S. Treasuries lower by 46 basis points (bps) and 37 bps, respectively.
► Additionally, economic data pointed to a slowing but resilient economy as payrolls showed the labor market moving into better balance. In response to the positive data, technicals showed strength and provided support to the market.
► Lower-quality credits outperformed on prospects for the rate cutting cycle to begin, with BB, B, and CCC credits gaining 1.55%, 1.77%, and 3.64%, respectively.
► Spreads widened 5 bps to 314 bps and excess returns were 0.36%. The yield-to-worst (YTW) decreased from 7.9% at the end of June to 7.6% at the end of July.
