Highlights of February market action:
- HY index dropped 3.5% for the month, gave back half of its January advance.
- Every major asset class outside of cash posted losses in February: IG -1.6%, Treasuries -1.4%, equities -11%, EU HY -3.2%, EM Sovereigns -1.0%.
- The best relative performance outside of cash was registered in nondistressed HY, which slipped by only 0.3% during the month.
- So far YTD, HY is marginally positive, at 1.7%. This compares to declines in other major asset classes, including 5.9% in Treasuries, 1.2% in IG, and 19% in equities.
- Quality differentiation remains key: BBs were down 1.4% in February vs. 7.7% drop in CCCs. Over the past three months, BBs were the best performing segment across all asset classes that we track with a +12.4% gain.
- Level of distress remains elevated in both IG and HY markets: our distress ratio (proportion of bonds trading at 1,000bp and higher), is at 12.1% among IG issuers and 68.2% in HY. Both levels are roughly unchanged from January. Total par amount of bonds trading at distressed levels stands at $811bn.