Allspring High Yield Bond Fund Q4 2024 Commentary

Summary

• U.S. high yield bonds delivered positive returns in Q4, driven by Federal Reserve rate cuts, with leveraged loans outperforming fixed-rate bonds.
• Lower-rated CCC bonds outperformed higher-rated securities, with telecom and transportation sectors driving performance, while health care and real estate lagged.
• High yield spreads tightened, yields rose, and default rates remained below 2%, with stable expectations due to extended runways and liability management.
• Portfolio positioning saw neutral duration impact, negative yield curve and quality allocation, neutral sector allocation, and positive issue selection, particularly in basic industry and services.

Torsten Asmus

Market review

U.S. high yield bonds delivered positive returns in a fourth quarter bookended by Federal Reserve rate cuts. Leveraged loans outperformed fixed-rate bonds, though both segments of the leveraged finance markets outperformed investment-grade corporate bonds. Lower-rated CCC-rated bonds outperformed higher-rated