The Insight by Oaktree Capital Keeping Composed
Jul 10, 2025
Madelaine Jones, a Portfolio Manager for European High Yield Bonds, joins Justin Quaglia, a Credit Trader focused on high-yield bonds, and Christopher Gray, a Managing Director in Asset-Backed Finance at Oaktree. They discuss the recent volatility in credit markets, exploring the psychological impacts on investors. The group analyzes the dynamics of leveraged credit and the impact of regulatory changes on trading. Finally, they delve into opportunities in asset-backed finance amidst a shifting economic landscape, emphasizing the importance of strong investment relationships.
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Intense April Market Volatility
- Justin Quaglia shared his experience of intense market volatility in early April 2023.
- He often sent multiple daily market notes, capturing one of the most extreme volatilities since the financial crisis.
Pricing Credit Risk Probabilistically
- Credit investors price risk probabilistically amid uncertainty, adjusting spreads to ensure proper compensation.
- Peak uncertainty in early April caused spreads to widen before some clarity returned.
Higher Rates and Improved Market Quality
- Rising interest rates increased yields on high-yield bonds, providing more meaningful returns for investors.
- The market quality improved, with higher-rated issuers lowering the need for wide spreads to compensate risk.