2026 High Yield & Leveraged Loan Mid-Year Review & Outlook
Markets appear resilient on the surface, but growing issuer-level dispersion is creating opportunity beneath the surface.
While headline returns have been respectable, beneath the surface, dispersion has increased. Market averages have remained relatively stable, but issuer-level outcomes have diverged meaningfully based on business quality, industry positioning, and exposure to structural change. In our view, this widening dispersion has been one of the defining characteristics of leveraged credit markets in 2026 and has created a more favorable backdrop for active management.
What makes the current environment particularly interesting is the growing divergence between stronger and weaker credits.
Opportunity Below the Surface
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References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations.
The ICE BofA US High Yield Index, which is maintained by ICE Data Indices, LLC, is market capitalization weighted and comprises U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofA Europe High Yield Index (USD Hedged) is a euro-denominated high yield corporate bond index with returns hedged into U.S. dollars. Morningstar LSTA U.S. Leveraged Loan Index: The Morningstar LSTA US Leveraged Loan Index is a broad, unmanaged high yield index composed of loans that meet the following inclusion rules; senior secured, minimum initial term of one year, initial minimum spread of Base Rate+125 basis points at inception, minimum size of $50 million, and U.S. dollar-denominated. It is impossible to invest directly in an index. The performance of an index does not reflect any transaction costs, management fees, or taxes.
Discounted Spread to Maturity is a measure of the yield spread of a floating-rate loan above a reference rate, based on its current market price and expected repayment at maturity. Option Adjusted Spread (OAS) is the yield spread of a bond over a risk-free benchmark, adjusted for the impact of embedded options. Yield to Maturity (YTM) is the annualized return an investor can expect if a bond is held until maturity, assuming all interest payments are received as scheduled and reinvested at the same rate. Yield to Worst is the lower of the yield to call or yield to maturity.
Past performance is not indicative of future results.
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