The Honey Badger Market

US high yield has become a more resilient market in which shocks widen spreads but have rarely developed into broad credit crises.

• Over the past dozen years, episodes including the 2014 oil collapse, the 2020 pandemic, the Ukraine war, inflation and Fed hikes, recession fears, tariff tensions and the US-Iran war generally produced temporary spread widening followed by relatively rapid recovery.
• The recession expected in 2022 did not occur, corporate earnings held up better than feared and defaults remained relatively contained.
• BB-rated bonds rose from approximately 38% of the US High Yield Index in 2007 to approximately 60% in 2026; duration also declined, secured issuance increased and refinancing replaced acquisition financing as the dominant use of proceeds.
• Leveraged loans and private credit have financed many speculative borrowers, reducing pressure on cash high yield, although stress has emerged in parts of private credit because of lower-quality portfolios and issuer concentration in technology-related names.
• Robust demand for yield, suppressed new-issue supply and attractive all-in yields supported spreads, while the recent return of loan-only issuers to high yield may signal tighter funding capacity in loans and private credit.
• Energy exposure distorted the index during past crises, while the Covid recovery depended heavily on fiscal and monetary support rather than solely on fundamentals or technicals.

Takeaway: Future volatility may create buying opportunities because improved index quality, supportive technicals and a diversified financing ecosystem could absorb shocks, but a persistent US 10-year yield near 5%, refinancing needs, oil-driven inflation or geopolitical events could still trigger a broader credit event.