Leveraged Credit 2025 Midyear Review & Outlook
Polen’s leveraged credit investment team discusses the market turbulence during the first half of 2025 and what may be in store for investors in the months ahead.
Key Highlights
- Market Volatility: The start of U.S. President Trump’s second term introduced significant volatility to the leveraged credit market. Executive orders, trade policies, and elevated interest rates collectively hindered deal flow.
- Performance Overview: During the height of tariff turmoil, high yield bond and leveraged loan indices saw negative returns, with the sectors most sensitive to tariffs and economic slowdowns facing the greatest challenges. However, a healthy recovery followed the announcement of tariff pauses on April 9, allowing both high yield bonds and loans to recoup their losses.
- Defaults: While default rates remain low, forecasts suggest increases in defaults for high yield bonds and loans during the second half of 2025.
- Investment Opportunities: The current environment, while turbulent, presents opportunities for active investment managers to identify undervalued credits that offer attractive yields.
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Important Disclosures
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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 S&P UBS Leveraged Loan Index is designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market. It is impossible to invest directly in an index. The performance of an index does not reflect any transaction costs, management fees, or taxes.
Past performance is not indicative of future results.
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