Jun 26, 2026 · 17 min · 10 segments
The US high yield market has weathered recent market turbulence well, but selectivity is becoming increasingly paramount. Jack Stephenson, Senior Investment Specialist, tells Chris Iggo that the…
Jack StephensonGuest
Chris IggoHost
How has that impacted on the US oil yield market? The performance has been pretty good, but maybe you want to give your take on how things have evolved.
Firstly, it does seem like there is now a credible pathway to a resolution of the military conflict in Iran.
If we think about the time it might take for oil to flow freely again, for stockpiles to be rebuilt, for supply chains to ease, there's clearly a lot that still remains to be seen.
Then we also, from a U.S. perspective, have to consider what the fallout might be of higher energy prices impacting on gasoline prices at the pump.
The ultimate pass-through to inflation and what all this means for the consumer, let alone what the reaction function of a Fed under new leadership will be.
But all that said, the direct impact on the US high yield market in terms of returns has been relatively limited.
The market recovered from that remarkably quickly, which is actually consistent with similar bouts of volatility that we've seen over recent years.
Spreads actually tightened at the beginning of March when the conflict began, which surprised some people.
But simply because you had rates moving higher, you saw spreads tightening and there was no traditional risk-off that you might expect in such an event.
Eventually, towards the end of March, you did see spreads widen modestly, but they peaked at around 350 basis points on the option-adjusted spread there.
So still some 100 basis points lower than 2025's Liberation Day-related peak.
Then, of course, we saw spreads rallying back to levels... tighter today than even at the start of the year.
I think that brings it back to whether markets are seemingly so complacent around all these headline risks.
And then you have equity markets on fire, you have spreads tightening, you have a lot of exuberance around some notable IPOs.
How has that impacted on the US oil yield market? The performance has been pretty good, but maybe you want to give your take on how things have evolved.
Firstly, it does seem like there is now a credible pathway to a resolution of the military conflict in Iran.
If we think about the time it might take for oil to flow freely again, for stockpiles to be rebuilt, for supply chains to ease, there's clearly a lot that still remains to be seen.
Then we also, from a U.S. perspective, have to consider what the fallout might be of higher energy prices impacting on gasoline prices at the pump.
The ultimate pass-through to inflation and what all this means for the consumer, let alone what the reaction function of a Fed under new leadership will be.
But all that said, the direct impact on the US high yield market in terms of returns has been relatively limited.
The market recovered from that remarkably quickly, which is actually consistent with similar bouts of volatility that we've seen over recent years.
Spreads actually tightened at the beginning of March when the conflict began, which surprised some people.
But simply because you had rates moving higher, you saw spreads tightening and there was no traditional risk-off that you might expect in such an event.
Eventually, towards the end of March, you did see spreads widen modestly, but they peaked at around 350 basis points on the option-adjusted spread there.
So still some 100 basis points lower than 2025's Liberation Day-related peak.
Then, of course, we saw spreads rallying back to levels... tighter today than even at the start of the year.
I think that brings it back to whether markets are seemingly so complacent around all these headline risks.
And then you have equity markets on fire, you have spreads tightening, you have a lot of exuberance around some notable IPOs.
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