00:00Jerry, talk to me about the high yield market, because spreads mostly haven't been moving this year, but triple C
00:06spreads have moved quite a bit.
00:09What does that mean?
00:11Well, I think when you look at the high yield market, you can look at the high level and you
00:17say, okay, high yield spreads today are 270 roughly.
00:21That's not a lot of compensation to absorb volatility, not a lot of compensation to absorb loss.
00:26If you look over the last 25 years, we're trading in pretty tight spreads.
00:31If you pull the lens back, as you mentioned, and you look at the subcategories by rating and you look
00:37at triple Cs, there's been a real underperformance.
00:40That underperformance is really pronounced over the last couple of months.
00:44There's a few sectors that are really driving that.
00:49And so when you think about triple Cs, it tells you a couple of things.
00:52I think it tells you that there's some real weakness under the surface.
00:56I mean, you know, the triple C cohort of the high yield market is roughly 10 percent, so it's smaller
01:02than it has been.
01:03High yield market itself is of higher quality.
01:05But we're seeing some real stress underneath the surface in a couple of sectors.
01:10I think software is a big one.
01:12Cable has seen its own areas of stress.
01:16And there's a few idiosyncratic names that tend to overwhelm.
01:20And I think what it tells you, I think, is it's in some sense a healthy sign, which is, you
01:25know, the market doesn't fund a bad business.
01:28You don't solve that with capital.
01:31In another sense, it does tell you maybe of growing vulnerabilities in the marketplace that we have to pay attention
01:36to.
01:36We're seeing that in the high yield market in triple Cs.
01:39And we're seeing that in the leveraged loan market as well with a growing cohort of loans trading below 85.
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