Author: Rich Balestra - Portfolio Manager

(Bloomberg)  High Yield Market Highlights

• US junk bond yields soared and risk premiums approached 300 basis points fueling the biggest one-day loss in nearly a year, as fears of higher oil prices and inflation rattled markets. The energy sector accounts for more than 11% of the US high yield index.
• The selloff comes as the private credit market shows signs of stress, with redemptions mounting and withdrawals being blocked. Yields jumped the most in nearly a year, and losses spanned across ratings. BB yields surged to close at an eight-month high.
• Middle East risks, sticky inflation and private credit stress are headwinds for Treasury yields and spreads, Barclays strategists Brad Rogoff and Dominique Toublan wrote in note. However, solid fundamentals and strong demand for yield should limit the downside, they wrote
• CCCs, the riskiest part of the junk bond market, racked up the most losses in four months. Spreads closed at 637 basis points
• Oil markets brushed aside the largest-ever release of emergency energy stockpiles as President Donald Trump said that preventing Iran from having nuclear weapons and threatening the Middle East is “of far greater interest and importance to me” than the cost of oil
• In the primary market, US borrowers shrugged off elevated volatility and moved off the sidelines
• Two more deals for more than $1b priced on Thursday driving the week’s tally to $4.6b and March’s volume to nearly $10b. Additionally, the market is readying for a crowded calendar next week.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bonds will take their cue from key employment and retail sales data Friday amid broader market angst tied to Iran war
• Meanwhile, issuance of new junk notes has slowed to a trickle
• Thursday saw one deal enter the market, a $250 million tap from NGL Energy, but that offering was subsequently dropped as a concurrent leveraged-loan offering was upsized by that amount
• High-yield bonds have posted losses on five of the last six sessions, and the market is at risk of its first back-to-back weekly declines in four months, according to data compiled by Bloomberg

(Bloomberg)  US Unexpectedly Sheds 92,000 Jobs, Unemployment Rate Rises

• US employers unexpectedly cut jobs in February and the unemployment rate rose, pointing to lingering fragility in a labor market that was thought to be stabilizing.
• Nonfarm payrolls decreased 92,000 last month after a strong start to the year, according to Bureau of Labor Statistics data out Friday. The unemployment rate climbed to 4.4%. The decline in payrolls — which was one of the largest since the pandemic — partly reflected a decrease in health care employment due to strike activity.
• The report calls into question whether the labor market is actually steadying after the worst year for hiring outside of a recession in decades. While job growth jumped in January and unemployment insurance claims have settled at a low level, companies may be starting to follow through on a series of previously announced layoffs.
• And a recent trend in productivity gains illustrates how spending on artificial intelligence has allowed some firms to get by with leaner staffing.
• “The idea the labor market has turned a corner implodes with this report,” Samuel Tombs, chief US economist at Pantheon Macroeconomics, said in a note.
• The figures could refocus the Federal Reserve’s attention on the jobs market as it assesses how long to hold interest rates steady. Policymakers have been more attuned to inflation lately — even before the US-Israeli war on Iran sparked concerns among investors about price pressures.
• In an interview on CNBC following the report, San Francisco Fed President Mary Daly said, “The hopes that the labor market was steadying, maybe that was too much, and we really have to keep our eye on the labor market.”

(Bloomberg)  US Retail Sales Fell in January on Fewer Vehicle Purchases

• US retail sales declined in January, restrained by weakness at auto dealers as winter weather-related disruptions tempered some activity.
• The value of retail purchases, not adjusted for inflation, decreased 0.2% after no change in December, Commerce Department data showed Friday. Excluding car dealers, sales were little changed.
• Seven out of 13 categories posted decreases. Motor vehicle sales dropped 0.9%, while receipts at apparel merchants, gas stations and health and personal care stores also declined.
• The report showed a 0.3% increase in so-called control-group sales — which feed into the government’s calculation of goods spending for gross domestic product. The measure excludes food services, auto dealers, building materials stores and gasoline stations.
• More modest overall retail spending at the turn of the year has been accompanied by worries about the job market and cost of living. While wealthier households have the wherewithal to purchase non-essential goods, middle- and lower-income consumers may be growing more cautious.
• Walmart Inc., a bellwether for the economy, last month forecast less earnings growth this year than expected.
• A lengthy winter storm that included significant snowfall and ice across the central and eastern US likely impeded shoppers during the weather event. The Arctic blast triggered the most flight cancellations since the pandemic and left more than 1 million homes and businesses without power.
• Receipts at restaurants and bars, the only service-sector category in the retail report, declined 0.2% in January. Restaurants including Sweetgreen Inc. and Chipotle Mexican Grill Inc. said that sub-freezing temperatures and winter storms hindered sales.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bonds tumbled, yields rose and risk premiums surged as anxieties over artificial intelligence boiled over, causing a broad reassessment of riskier assets. Yields jumped the most in three weeks to 6.63% and spreads widened the most in four months to 275 basis points.
• The selloff extended across ratings. CCC yields approached 10% after the biggest one-day increase in 10 months. Spreads rose 27 basis points to close at the year-to-date high of 616 basis points.
• Single B spreads closed at 302, a more than two-month high. Yields climbed to approach 7%
• The broad selloff started mid-week after a stronger-than-expected jobs report dashed hopes of Fed rate cuts
• The primary market paused on Thursday, with just one deal pricing
• A stable labor market and relatively strong corporate balance sheets kept the primary market busy earlier in the week; February volume is above $12b
• Four borrowers priced more than $4b on Wednesday, the busiest single-day volume in three weeks

(Bloomberg)  US Adds 130,000 Jobs and Unemployment Falls After Tepid 2025

• US payrolls rose in January by the most in more than a year and the unemployment rate unexpectedly fell, suggesting the labor market continued to stabilize at the start of 2026.
• Employers added 130,000 jobs last month and the unemployment rate declined to 4.3%, according to Bureau of Labor Statistics data out Wednesday. That followed revisions to the prior year, which showed a marked slowdown in hiring. Job gains averaged just 15,000 a month last year, down from the initially reported 49,000 pace.
• The report suggests the labor market is finding its footing after the most anemic year for hiring outside of a recession since 2003. While economists expect hiring to remain generally sluggish in 2026, more clarity around the impact of President Donald Trump’s economic policies and lower borrowing costs could encourage some employers to boost headcount.
• The January data reinforces Federal Reserve officials’ inclination to keep interest rates on hold for now. Many traders appeared to push out their timeline for the next rate cut to July from June.
• In leaving rates unchanged last month, Chair Jerome Powell cited signs of steadying in the job market.
• “Coming off of a hiring recession in 2025, this is welcome news,” said Heather Long, chief economist at Navy Federal Credit Union. “I think Fed Chair Powell was right — the labor market appears to be stabilizing.”
• With the release of each January employment report, BLS benchmarks payrolls to a more accurate but less timely series called the Quarterly Census of Employment and Wages. That data is based on state unemployment insurance tax records and covers most US jobs.
• That adjustment showed job growth was nearly 900,000 lower in the 12 months through March 2025 than initially reported. The figure roughly aligned with what the BLS’s preliminary estimate suggested.
• The pickup in January hiring was led by health care, which added the most jobs since 2020 and accounted for the majority of overall job growth in 2025.  Federal government payrolls continued to decline.
• “It’s great that health care is growing the way it is, but I would feel much better if we were seeing broader strength,” said Laura Ullrich, director of economic research at Indeed Hiring Lab. “It is quite lopsided growth.”
• Though layoffs remain generally constrained, there’s been a wave of job-cut announcements by companies like Amazon.com Inc. to United Parcel Service Inc. in recent weeks. And heading into this year, job openings across the economy dropped to the lowest level since 2020.
• The jobs report is comprised of two surveys, one of businesses — which produces the payrolls figures — and another of households, which is the source of the unemployment rate. Within the household survey, the participation rate — the share of the population that is working or looking for work — edged up to 62.5% in January.
• Wednesday’s release also included widespread revisions to the employer survey. With the release of the January 2026 data, the BLS updated its so-called birth-death model, which accounts for the net number of businesses opening and closing. Economists have noted this change should improve the model’s responsiveness to current economic conditions and reduce the size of benchmark revisions over time.
• Adjustments to job numbers have been bigger than usual in recent years, which some economists attribute to unique post-pandemic dynamics.
• While the January jobs report usually incorporates new population estimates from the Census Bureau into the household survey, those figures were delayed by a month due to last year’s record-long government shutdown.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bonds stalled for a third straight session as yields climbed after data showed consumer confidence collapsed to its lowest level in more than a decade. A measure of consumer sentiment on present conditions slid to a five-year low, reinforcing concerns about a potential economic slowdown. The market racked up the biggest one-day loss in eight sessions.
• The declines gained momentum after Chair Jerome Powell signaled that the Federal Reserve is prepared to keep rates on hold for an extended period. The markets do not expect any rate cuts before June. However, Bloomberg economist Anna Wong suggests that data developments will cut short any pause and the Fed will reduce rates by 100 basis points this year.
• While the market rally lost its momentum this week, pushing yields modestly higher and spreads wider, the primary market rushed to take advantage of still-low risk premiums, attractive yields and strong demand
• The overall economic picture is constructive, though the sentiment is weak, Barclays strategists Brad Rogoff and Dominique Toublan wrote on Friday
• Three new deals priced a total of $2.5b on Thursday, driving the month’s volume to nearly $28b. At close of business today, the issuance volume will close the month at $30b to make it the second busiest January since 2021. It will be the busiest month for supply since September
• The primary calendar is still pretty crowded

(Bloomberg)  Fed Holds Rates as Window for Another Powell Cut Begins to Close

• Jerome Powell has two more opportunities to adjust interest rates before his term as Federal Reserve chair ends — and he may not need them.
• After the Fed kept borrowing costs on hold Wednesday, Powell talked up a “clear improvement” in the US outlook and said the job market shows signs of steadying. It signals a cautious optimism: Fed officials delivered three cuts last fall, and see nothing in the latest data to suggest more are needed to prop up the economy. Futures markets expect no shift in rates before June.
• By then, Powell’s term as chair will have ended and a new one should be in place — likely opening another phase of President Donald Trump’s campaign for lower rates, which has upended the Fed over the past year. In a potential sign of what’s coming, the only two officials who voted for another cut this week were Governor Stephen Miran — on leave at the Fed from his post as a top Trump aide — and Governor Christopher Waller, one of four names on Trump’s shortlist of potential Powell successors.
• “The window for a cut under a Powell-led Fed is essentially closed,” said Stephanie Roth, chief economist at Wolfe Research. “He is more optimistic about the labor market and economy overall than he was.”
• The Federal Open Market Committee voted 10-2 Wednesday to hold the benchmark federal funds rate in a range of 3.5%-3.75%. Waller and Miran dissented in favor of a quarter-point reduction. Officials dropped language pointing to increased downside risks to employment that had appeared in the three previous statements.
• Numbers published since the Fed’s December meeting point to accelerating growth, cooling inflation and steadying employment.
• “The outlook for economic activity has improved, clearly improved since the last meeting, and that should matter for labor demand and for employment over time,” Powell told reporters Wednesday.
• That upgraded assessment of the labor market is likely to hold expectations for a near-term rate cut at bay, despite escalating pressure from the Trump administration. Still, Powell was at pains not to overstate the improvement in the labor market. While it’s shown signs of stabilizing, “I wouldn’t go too far with that,” he said.
• Fed watchers said the mixed messaging suggests policymakers want to keep their options open.
• “You could get whiplash from the various descriptions,” said Tim Mahedy, a former senior adviser at the Federal Reserve Bank of San Francisco.
• On inflation, Powell said the overall story was “modestly positive,” despite his estimate that the Fed’s favored gauge ended 2025 at 3%, a full percentage point above target.
• “Most of the overshoot was in goods prices, which we think is related to tariffs,” he said. “We think those will not result in inflation, as opposed to a one-time price increase.”

(Bloomberg)  Trump Picks a Reinvented Warsh to Lead the Federal Reserve

• News out Friday morning…
• President Donald Trump said he intends to nominate Kevin Warsh to be the next chair of the Federal Reserve.
• Warsh, who served on the US central bank’s Board of Governors from 2006 to 2011 and has previously advised Trump on economic policy, would succeed Jerome Powell when his term at the helm ends in May, if confirmed by the Senate.
• Warsh is currently an adviser at Stanley Druckenmiller’s Duquesne Family Office, a fellow at the conservative Hoover Institution think tank and a lecturer at Stanford Business School.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bonds stalled after a two-day rally as jobless claims dropped to a three-year low, suggesting employers are largely holding onto workers. Still, the market is on track for its fourth straight week of gains amid growing expectations of a Fed rate cut next week.
• Yields were unchanged on Thursday, and are now just two basis points above the multi-year low of 6.57%. Spreads closed at a five-week low of 267 basis points and just 11 basis points above the year-to-date low.
• Steadily falling yields and tighter spreads crowded the primary market, with 12 borrowers pricing more than $12b in four sessions this week, the busiest in more than two months.
• Two more borrowers entered the market on Thursday and priced $4b. Both were BB-rated bonds and priced at the tight end of talk. Nine of the 12 deals were BB rated
• The market wobbled across ratings in reaction to the jobless claims data, though CCCs shrugged off the weakness and notched gains for the third straight session. Yields dropped to a five-week low of 9.91% and are poised for a third week of declines
• BB yields jumped nine basis in the past four sessions to 5.60%. Returns are expected to stay flat for the week

(Bloomberg)  Payrolls at US Companies Fall by Most Since 2023, ADP Says

• US companies shed payrolls in November by the most since early 2023, adding to concerns about a more pronounced weakening in the labor market.
• Private-sector payrolls decreased by 32,000, according to ADP Research data released Wednesday. Payrolls have now fallen four times in the last six months. The median estimate in a Bloomberg survey of economists called for a 10,000 gain.
• Wednesday’s weak ADP report risks heightening concerns of a more rapid deterioration in the labor market ahead of the Federal Reserve’s final policy meeting of the year next week. It could hold more sway than usual as one of the few up-to-date reports officials will have by then, as the shutdown delayed the government’s November jobs report.
• Policymakers have been torn as to whether they’ll cut interest rates for a third straight meeting as they attempt to balance the slowdown in the job market with still-elevated inflation. Investors, however, widely expect the Fed to lower borrowing costs next week.
• “I think it’s still probably going to be a pretty divided decision,” said Veronica Clark, an economist at Citigroup Inc. The expectation is there will be a rate cut, but the guidance will be more hawkish, she said, as the Fed will also provide fresh quarterly economic projections at the meeting.
• “Hiring has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment,” Nela Richardson, chief economist at ADP and a contributor to Bloomberg Television, said in a statement.
• Professional and business services led the decline in payrolls, followed by information and manufacturing. Hiring in education and health services increased.
• Until recently, economists have largely said the labor market is in a state of low hiring and low firing. But a number of large companies like Apple Inc. and Verizon Communications Inc. have recently cut workers or announced plans to do so, which risks driving unemployment higher.
• The November jobs report from the Bureau of Labor Statistics, originally due Dec. 5, will now come out Dec. 16 as data collection was halted during the record-long shutdown. That report will also include nonfarm payrolls for October since BLS is skipping a full release for that month, as it couldn’t collect certain data retroactively.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

• US junk bonds tumbled Thursday, posting their worst one-day loss in nearly five weeks after a chorus of Fed officials warned against premature rate cuts. The slide came just as investors braced for a deluge of economic data, with the government reopening after the longest shutdown in US history.
• Yields jumped the most in five weeks to 6.89% and risk premium climbed to 291 basis points. Losses swept across ratings tier, with CCC yields rising 18 basis points to a near three-month high of 10.29%. Spreads widened 15 basis points, the most in five weeks, to 652.
• As Fed officials signaled caution about future rate cuts, the probability of a rate reduction in December dropped below 50%
• Cleveland Fed President Beth Hammack said it’s critical for the US central bank to reach its 2% inflation target even as the labor marker softens. “We’ve got this persistent high inflation that is sticking around,” she warned
• Louis President Alberto Musalem reiterated that officials should move cautiously over further interest rate reductions with inflation running above the central bank’s 2% target
• Minneapolis Fed President Neel Kashkari said anecdotal evidence and the data showed there is an underlying resilience in economic activity
• The selloff snapped a three-day rally and slowed down the primary market. No new borrower launched a debt sale amid the sudden eruption of volatility
• Before the eruption of volatility on Thursday, the market priced nearly $4b in the two sessions of this holiday-shortened week

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bonds tumbled, posting their steepest one-day loss in three weeks, as the risk premium climbed to 278 basis points after Chair Powell cautioned that a December rate cut is not a foregone conclusion. Yields rose 11 basis points to 6.76%, the biggest one-day jump in three weeks.
• The losses spanned across ratings. CCC yields, the riskiest tier of the high yield market, climbed 14 basis points to 9.84%. Spreads rose 14 basis points to 607 — the biggest one-day widening in three weeks.
• BB yields rose to 5.68% and spreads widened to 168
• The primary market ground to a halt after pricing a modest $4b this week and driving the October tally to about $18b, the slowest month for supply since April

(Bloomberg)  Logan Joins Schmid in Opposing Fed Rate Cut, Citing Inflation

• Two Federal Reserve officials said they did not support the US central bank’s decision to cut interest rates this week, citing inflation that remains too high.
• Dallas Fed President Lorie Logan said she “did not see a need to cut rates this week” in remarks Friday prepared for an event in Dallas. Her comments followed a statement earlier in the day from her Kansas City counterpart, Jeff Schmid, outlining the reasons for his dissent against Wednesday’s rate cut.
• The remarks from Logan and Schmid were the first salvo in what is likely to be an intense debate over the next six weeks before the central bank’s next policy meeting in December, between officials who see a need for more easing to support the labor market and those who are more concerned about inflation.
• “I’d find it difficult to cut rates again in December unless there is clear evidence that inflation will fall faster than expected or that the labor market will cool more rapidly,” Logan said.
• Fed officials cut their benchmark rate this week by a quarter percentage point for a second month in a row after a sharp slowdown in hiring over the summer raised concerns about the labor market. Chair Jerome Powell, speaking to reporters Wednesday after the decision, said another cut in December was not a forgone conclusion, noting that some of his colleagues were concerned about inflation.
• That led to a sharp adjustment in the bond market, where investors had been pricing in near certainty of another quarter-point cut in December.
• While Logan doesn’t vote on monetary policy this year, she participates in Federal Open Market Committee discussions and will rotate onto the voting panel in 2026. Two Fed officials voted against the decision at this month’s meeting, with Schmid preferring to hold rates steady and Governor Stephen Miran dissenting for a second straight meeting in favor of a larger, half-point cut.
• “By my assessment, the labor market is largely in balance, the economy shows continued momentum, and inflation remains too high,” Schmid said in his statement.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bonds are headed for modest weekly gains after yields fell by a mere two basis points in the last four sessions and risk premium by just five basis points. A resurgence of trade tensions with China and a lack of macro data to assess the state of the economy because of the government shutdown have weighed on sentiment.
• The US junk bond rally also lost some momentum as jittery investors pulled $970m from high-yield mutual funds, excluding exchange-traded funds, for the week ended Wednesday, according to Lipper. This is the second straight week of cash outflows from US junk bond mutual funds, excluding ETFs. The two weeks combined resulted in an outflow of $1.73b.
• While the rally lost steam, participants drew comfort from robust corporate earnings and the potential that the Federal Reserve will reduce interest rates at its meeting next week
• After a sudden burst of issuance this summer and a supply boom that made it the busiest September on record, the primary market has slowed, with issuance almost grinding to a halt
• Just three deals for $2.8b were priced so far this week, taking the month’s volume to about $14b, the lightest since April

(Bloomberg)  US CPI Rises Less Than Expected, Keeping Fed on Track to Cut

• Underlying US inflation rose in September at the slowest pace in three months, keeping the Federal Reserve on course to lower interest rates next week.
• The core consumer price index, excluding the often volatile food and energy categories, increased 0.2% from August, according to Bureau of Labor Statistics data out Friday. That was restrained by the smallest increase in a key measure of housing costs since early 2021.
• The September CPI report was initially scheduled to come out on Oct. 15 but was delayed because of the ongoing federal government shutdown. While most BLS operations have ceased since the Oct. 1 closure, the agency recalled staff to prepare this release so the Social Security Administration could tally its annual cost-of-living adjustment.
• The lower-than-expected reading is a welcome surprise, especially for several Fed officials who are leery of cutting rates further. While the central bank was already widely expected to lower borrowing costs at its meeting next week, the report may help convince policymakers that they can do so again in December — especially in the absence of other official reports should the shutdown continue.
• Goods prices, excluding food and energy commodities, rose at a slower pace, dragged down by cheaper prices for used cars. Categories that are more exposed to tariffs, including household furnishings and recreational goods, advanced. Apparel prices climbed at the fastest rate in a year.
• Services prices excluding energy climbed 0.2%, in part reflecting a slower advance in airfares. Shelter prices were tame after rising by the most since the start of the year in the prior month. That included just a 0.1% increase in owners’ equivalent rent — which accounts for roughly a quarter of the overall CPI.
• While the inflationary impact of tariffs has been much less than many economists feared, several forecasters and policymakers are still wary that the duties will continue to put upward pressure on prices — which was evident in some private-sector gauges of inflation in September. President Donald Trump’s latest tariffs, aimed at household goods like kitchen cabinets and upholstered furniture, took effect earlier this month, and retailers like RH have warned of price increases to come.
• Companies across the country have largely reported higher input costs due to tariffs in recent weeks, but the hit to consumers has been uneven, the Fed said in its latest Beige Book survey of regional business contacts. Procter & Gamble Co. is now expecting a more muted impact from tariffs and commodity prices, while O’Reilly Automotive Inc. said they adjusted selling prices to account for the increase in tariff-related costs.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bonds were broadly resilient as they shrugged off concerns about credit quality after Zions Bancorp disclosed a charge-off for a bad loan at a subsidiary tied to alleged fraud. Junk bond yields held steady and spreads moved in tandem with five-year US Treasury yields even as equities churned on worries about regional banks soon after the First Brands Group collapse.
• While high yield spreads closed at 6.76%, just two basis points higher, leading to a modest loss of 0.3% on Thursday. The high yield market is set for weekly gains, with week-to-date returns at 0.56%, the most since the week ended June 27
• CCC yields were still far below 10%, closing at 9.87%, and spreads closed at 627 basis points
• BB yields barely moved and closed at 5.72%, while spreads closed at 185 basis points. BBs are also headed for a weekly gain, with week-to-date returns at 0.54%
• The markets, while struggling to assess the impact of the US-China trade war and broader credit quality in the wake of the regional bank scare, shifted their attention to widely expected interest-rate cuts after Chair Powell signaled that the Federal Reserve is set to deliver a quarter-point reduction at its meeting later this month. Speculation that the Fed will lower interest-rates twice this year fueled optimism about corporate earnings.
• The primary market is steady and investors are still hungry for new paper.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.