• After more than a year of climbing steadily higher, credit markets took a break in March.1 Investors initially pulled back as the Federal Reserve adopted a hawkish tone ahead of its mid-March meeting, economic data softened and oil prices declined.
  • Despite the almost month-long pause – where high yield bonds experienced a sharp decline in March versus senior secured loans’ slight drift downward – credit markets have largely picked up their earlier momentum once again in April.1 As the chart highlights, total returns on both high yield bonds and senior secured loans have now fully recovered from their March declines.1
  • Year to date, high yield bonds and senior secured loans have returned approximately 3.7% and 1.6%, respectively.1 Across both asset classes, all industries but one (retail) have generated positive returns in 2017.1
  • Notably, returns on energy senior secured loans and high yield bonds year to date, at approximately 5.6% and 3.0%, respectively, have both held in relatively well this year despite further declines in oil prices in recent weeks.2
  • Despite the shorter-term setbacks that high yield bonds and senior secured loans have seen this year, we believe investors may still value them for the relative yield they continue to offer in today’s low-rate environment.

1 Senior secured loans represented by the Credit Suisse Leveraged Loan Index. High yield bonds represented by the Bank of America Merrill Lynch U.S. High Yield Master II Index.
2 Energy senior secured loans represented by the energy component of the Credit Suisse Leveraged Loan Index. High yield bonds represented by the Bank of America Merrill Lynch U.S. High Yield Energy Index.


The Alternative Thinking Week in Review market commentary and any accompanying data (“Market Commentary”) is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The Market Commentary is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such Market Commentary. The Market Commentary should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the Market Commentary or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.