US high yield spreads still tight despite pick-up in distress

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Spreads on U.S. high yield bonds, or the premium companies pay over U.S. Treasuries, remain tight despite a pick-up in distress within the asset class, as investors see the majority of issuers weathering higher-for-longer interest rates. Elevated rates and persistent inflation have eaten into the bottom lines of many U.S. corporate borrowers, particularly those with high leverage and lower credit ratings. The dollar volume of defaulted debt rose to over $33 billion in the first quarter from roughly $19 billion in the fourth quarter of 2023, according to a Monday report by Moody's Ratings.