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Barrow Hanley Credit Partners Monthly Market Update | Growth Fears Rally Rates as Credit Quality Leads

In this post:

11.13.2026
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Executive Summary

  • Growth fears outweighed inflation; rates rallied despite more Fed hikes priced in
  • HY eked out a gain on strong technicals and low defaults; higher quality led
  • Loans posted a rare loss; issuance slowed and investors favored quality

Market Recap

Rates reversed course in October, where the 10 Yr began the month at 5.29% and ended just below 5%, despite an inflation backdrop that continued to worsen. Fears over future economic growth overwhelmed inflation concerns. Higher energy prices, tariffs, and supply constraints are heavily influencing inflation and expectations, and the market now prices in two additional 25bps rate hikes in December 2026 and March 2027. All told, these potential policy decisions would reverse any easing done during the Fed’s 2025 cycle. Economic activity suggests that restrictive financial conditions are beginning to affect some activity. Recent payroll growth, unemployment, and housing activity were all weaker. On the flip side, September retail sales growth, low initial jobless claims, and core capital goods shipment growth point towards continued resilience. Against this rate and policy backdrop, investment grade corporates returned +2.16% in the month; while the Bloomberg Aggregate was +2.44%, HY was +0.29% and loans were -0.25%.

Geopolitical uncertainty remained elevated through the month, with Russia and Ukraine, the Middle East, and growing sovereign debt concerns in Europe weighing on markets. WTI crude rose from $91 to $103/bbl, which contributed to pressure on households’ purchasing power. Talks of a Russia-Ukraine energy ceasefire temporarily eased concerns around even tighter global refining capacity. France’s deteriorating fiscal position caused wider sovereign spreads and raised questions about whether the ECB would intervene. 

The durability of the AI cycle dominated the news flow in October and increasingly the market consensus is this will likely determine the near-term path of the economic environment. Capital spending remains strong, supported by hyperscaler investment in data centers and GPUs, but investors are increasingly concerned about whether these investments would generate adequate returns. Wider neocloud credit spreads and negative market reactions to higher capital spending programs are the strongest indicators that the market is pivoting towards selectivity. Regardless of future profitability, constraints on power availability and community opposition may curtail investment, and upcoming mid-term election results will yield more insights about how restrictive policy might become. Equity markets so far have reacted more via rotational trades than with broad-based selling. Equal-weight S&P indices outperformed +4.94% in the month while tech-heavier indices experienced large pullback with the QQQ down -6.66%.

High Yield

October reversed the poor returns posted last month with HY up +0.29%. Similar to the return pattern for Loans, BB credit posted +0.9%, Single Bs returned -0.07%, and CCCs were down -2.92%, in lock-step with ratings quality. This was the second worst showing for HY CCC performance since October of 2023. Most of the poor performance in CCC HY came from the Cable sector, with select Healthcare names providing a strong offset. The High Yield index ended the month at an 8.30% yield-to-worst and an average price of $93.69.

October is generally a slow month for issuance, and this month was no exception with only $14.6bn issued versus $17.8bn in the month last year and $51.8bn of gross issuance in September. Year-to-date issuance is roughly on pace with 2025 levels at $281bn. Low supply in HY during the month was further magnified by upgrades from HY into Investment Grade with Rising Stars of $8bn in October, which reduces the size of the HY market overall. For six straight years, Rising Stars have outpaced Fallen Angels, pointing to a continued upgrade cycle for the strongest credits within the HY index. Fund flows were only slightly less constructive, as net inflows into ETF and mutual funds reversed to outflows by mid-month and reversed again by month-end. Net for the month HY lost about $1bn in retail asset demand. HY market technicals were strong in the month, and the net effect of new issues, weaker fund flows, and bond calls and tenders was a $17.1bn mismatch with demand exceeding supply, which helps underpin prices in an otherwise risk-off month.

Defaults were lower in the month, and it was the slowest month for new distressed situations since October 2023. The one default in the month was a repeat offender that is experiencing secular risks within the Media sector. YTD, default activity by number has been concentrated in the Healthcare and Technology subsectors, while the Cable subsector is top of the charts for dollar-amount impacted. On a par basis, HY Default rates are currently 2.63%, and excluding a single, large, distressed Telecom issuer, were only 1.95%.

Loans

Loans reversed in the month with total returns down -0.25% in October, which was the first negative return posting in eight months. Quality relatively outperformed in lockstep by rating. BB loans were +0.02%, Single Bs were -0.10% and CCCs were -3.23%. Loans are up +3.16% YTD. Overall index performance was hurt primarily by Telecom, Cable and Housing. The Loan index yield to a 3-year takeout is 9.56% and the average price is $93.56.

Gross issuance volume declined from $83.4bn in September to $42.1bn in October, as the volatility in the market caused many repricing transactions to pull back. The percentage of loans priced above par fell to 14% by the end of the month, impacting total issuance. Net issuance was still strong, and underwriting banks launched $18bn of M&A and LBO-related loans in the month, down from $31.2bn in September, which made October the 4th largest total of such issuance in 2026. Despite the relatively strong showing for M&A financings, there was a clear bias towards quality in the month that was similar to the pattern for loan returns by ratings. B2-rated and lower issuance struggled to keep pricing at original talk while most B1-rated and higher quality names tended to tighten. This pressure on lower-rated issuers also followed into favorable and less lenient documentation trends for lenders. Technicals within Loans were not as favorable as those of HY. Loan supply was more closely matched with demand and retail inflows remained more favorable for Loans than for HY.

CLOs 

Issuance within Broadly Syndicated CLOs ticked higher in October to $10.5bn from $9.3bn in September. Lower loan prices have drawn-in opportunistic buyers and improved the attractiveness of the arbitrage between current CLO AAA financing costs and BB/Single-B loan spreads. AAA financing spreads have begun to widen because of market volatility during the month. The weighted average cost of capital across the CLO liability stack is approximately 2.3bps wider (more expensive), which reduces equity returns all else equal, but the pace of liability widening is slower than that of asset spreads. Arbitrage for new CLOs has improved anywhere from 5-10bps from local tights in September, thanks to more discount and wider spreads in the loan asset class.

‍

BH Strategy Returns Month QTD 1 Year 3 Year 5 Year 10 Year 20 Year Since Inception
High Yield Composite Gross-0.03-0.033.469.775.136.216.596.50
High Yield Composite Net-0.07-0.073.019.264.645.716.085.99
Bank Loan Composite Gross-0.42-0.424.238.026.98--6.28
Bank Loan Composite Net-0.45-0.453.777.506.46--5.76
Asset Class Month QTD YTD Index
HY Return0.29%0.29%0.33%ICE BAML HY Index
HY BB Return0.90%0.90%-0.84%ICE BAML BB HY Index
HY B Return-0.07%-0.07%0.97%ICE BAML B HY Index
HY CCC Return-2.92%-2.92%-6.25%ICE BAML CCC HY Index
Leveraged Loan Return-0.25%-0.25%3.16%S&P UBS Leveraged Loan Index
LL BB Return0.02%0.02%3.89%S&P UBS Leveraged Loan BB Index
LL B Return-0.10%-0.10%3.82%S&P UBS Leveraged Loan B Index
LL CCC Return-3.23%-3.23%-7.79%S&P UBS Leveraged Loan CCC Index
HYG0.73%0.73%0.39%iShares iBoxx High Yield
BKLN0.57%0.57%2.56%Invesco Senior Loan ETF
S&P 500 Return-0.91%-0.91%11.69%S&P 500
Russell 2000 Return0.58%0.58%14.53%Russell 2000 Index
10 Year Beg5.29%5.29%4.17%10 Year Treasury
10 Year End4.93%4.93%4.93%10 Year Treasury
10 Year Return3.29%3.29%-0.72%10 Year Treasury
Beg Mo Beg QTD Beg Year End of Month
HY YTW8.30%8.30%6.62%8.21%
HY BB YTW7.15%7.15%5.55%6.91%
HY B YTW8.37%8.37%6.78%8.31%
HY CCC YTW16.75%16.75%12.57%17.96%
HY STW327 bps327 bps296 bps359 bps
HY BB STW210 bps210 bps186 bps227 bps
HY B STW337 bps337 bps315 bps371 bps
HY CCC STW1,180 bps1,180 bps892 bps1,343 bps
LL YT3Y9.62%9.62%7.86%9.56%
LL BB YT3Y7.41%7.41%5.79%7.21%
LL B YT3Y9.11%9.11%7.42%9.01%
LL CCC YT3Y23.48%23.48%17.95%25.08%
LL ST3Y482 bps482 bps455 bps510 bps
LL BB ST3Y263 bps263 bps247 bps276 bps
LL B ST3Y432 bps432 bps410 bps455 bps
LL CCC ST3Y1,855 bps1,855 bps1,471 bps2,052 bps

‍

Source: Barrow Hanley. Returns represent an asset-weighted composite of all Bank Loan Fixed Income portfolios or High Yield Fixed Income portfolios. Index returns are shown before transaction costs, management fees, and other expenses. Performance is expressed in U.S. currency. Net-of-fee returns are calculated using a model fee. The model fee is based on a $100 million portfolio using our standard fee schedule. Past performance is not indicative of future results. Inception Date for Bank Loans is June 1, 2018. Inception Date for High Yield is January 1, 2005.

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ABOUT BARROW HANLEY GLOBAL INVESTORS

Barrow Hanley is a diversified investment management firm offering value-focused investment strategies spanning global equities and fixed income. Recognized as one of the few remaining firms dedicated exclusively to value investing, Barrow Hanley enjoys a boutique culture with a singular focus to assist clients in meeting their investment objectives. Today, Barrow  Hanley has approximately 100 employees, over half of which are investment professionals managing assets for our valued clients. Barrow Hanley stewards the capital of corporate, public, multi-employer pension plans, mutual funds, endowments and foundations, and sovereign wealth funds across North America, Europe, Asia, Australia and Africa. For further information, please visit www.barrowhanley.com.

General Disclosures:

All opinions included in this report constitute Barrow Hanley’s (BH) judgment as of the time of issuance of this report and are subject to change without notice. This report was prepared by Barrow Hanley with information it believes to be reliable. This report is for informational purposes only and is not intended to be an offer, solicitation, or recommendation with respect to the purchase or sale of any security, nor a recommendation of services supplied by any money management organization. Past       performance is not indicative of future results. Barrow Hanley is a value-oriented investment manager, providing services to institutional clients.

Barrow Hanley Credit Partners® is a legally assumed name for the Alternative Credit investment team and investment strategies of Barrow Hanley Global Investors®, including Bank Loan Fixed Income, Collateralized Loan Obligations, and High Yield Fixed Income.

These investment summaries are provided for informational purposes only and should not be viewed as representative of all investments by the firm. This report includes certain “forward-looking statements” including, but not limited to, BH’s plans, projections, objectives, expectations, and intentions and other statements contained herein that are not historical facts as well as statements identified by words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “projects”, or words of similar meaning. Such statements and opinions contained are based on BH’s current beliefs or expectations and are subject to significant uncertainties and changes in circumstances, many beyond BH’s control. Actual results may differ materially from these expectations due to changes in global, political, economic, business, competitive, market, and regulatory factors. Additional information regarding the strategy is available upon request.

Index Disclosures:

Source: Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg’s licensors approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

Merrill Lynch index data referenced herein is the property of ICE Data Indices, LLC, its affiliates (“ICE Data”) and/or its Third Party Suppliers and has been licensed for use by Barrow Hanley Global Investors. ICE Data and its Third Party Suppliers accept no liability in connection with its use.

Standard and Poor’s and S&P are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC, and these trademarks have been licensed for use by S&P and Dow Jones Indices LLC and S&P Dow Jones Indices LLC. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a presentation of Barrow Hanley. S&P Dow Jones Indices LLC is not responsible for the formatting or configuration of this material or for any inaccuracy in Barrow Hanley’s presentation thereof.

Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a presentation of Barrow Hanley. Russell Investment Group is not responsible for the formatting or configuration of this material or for any inaccuracy in Barrow Hanley’s presentation thereof.

Please contact us for more information.

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Barrow Hanley Global Investors
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31st Floor Dallas, TX 75201
www.barrowhanley.com

11.13.2026
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Market Recap

Rates reversed course in October, where the 10 Yr began the month at 5.29% and ended just below 5%, despite an inflation backdrop that continued to worsen. Fears over future economic growth overwhelmed inflation concerns. Higher energy prices, tariffs, and supply constraints are heavily influencing inflation and expectations, and the market now prices in two additional 25bps rate hikes in December 2026 and March 2027. All told, these potential policy decisions would reverse any easing done during the Fed’s 2025 cycle. Economic activity suggests that restrictive financial conditions are beginning to affect some activity. Recent payroll growth, unemployment, and housing activity were all weaker. On the flip side, September retail sales growth, low initial jobless claims, and core capital goods shipment growth point towards continued resilience. Against this rate and policy backdrop, investment grade corporates returned +2.16% in the month; while the Bloomberg Aggregate was +2.44%, HY was +0.29% and loans were -0.25%.

Geopolitical uncertainty remained elevated through the month, with Russia and Ukraine, the Middle East, and growing sovereign debt concerns in Europe weighing on markets. WTI crude rose from $91 to $103/bbl, which contributed to pressure on households’ purchasing power. Talks of a Russia-Ukraine energy ceasefire temporarily eased concerns around even tighter global refining capacity. France’s deteriorating fiscal position caused wider sovereign spreads and raised questions about whether the ECB would intervene. 

The durability of the AI cycle dominated the news flow in October and increasingly the market consensus is this will likely determine the near-term path of the economic environment. Capital spending remains strong, supported by hyperscaler investment in data centers and GPUs, but investors are increasingly concerned about whether these investments would generate adequate returns. Wider neocloud credit spreads and negative market reactions to higher capital spending programs are the strongest indicators that the market is pivoting towards selectivity. Regardless of future profitability, constraints on power availability and community opposition may curtail investment, and upcoming mid-term election results will yield more insights about how restrictive policy might become. Equity markets so far have reacted more via rotational trades than with broad-based selling. Equal-weight S&P indices outperformed +4.94% in the month while tech-heavier indices experienced large pullback with the QQQ down -6.66%.

High Yield

October reversed the poor returns posted last month with HY up +0.29%. Similar to the return pattern for Loans, BB credit posted +0.9%, Single Bs returned -0.07%, and CCCs were down -2.92%, in lock-step with ratings quality. This was the second worst showing for HY CCC performance since October of 2023. Most of the poor performance in CCC HY came from the Cable sector, with select Healthcare names providing a strong offset. The High Yield index ended the month at an 8.30% yield-to-worst and an average price of $93.69.

October is generally a slow month for issuance, and this month was no exception with only $14.6bn issued versus $17.8bn in the month last year and $51.8bn of gross issuance in September. Year-to-date issuance is roughly on pace with 2025 levels at $281bn. Low supply in HY during the month was further magnified by upgrades from HY into Investment Grade with Rising Stars of $8bn in October, which reduces the size of the HY market overall. For six straight years, Rising Stars have outpaced Fallen Angels, pointing to a continued upgrade cycle for the strongest credits within the HY index. Fund flows were only slightly less constructive, as net inflows into ETF and mutual funds reversed to outflows by mid-month and reversed again by month-end. Net for the month HY lost about $1bn in retail asset demand. HY market technicals were strong in the month, and the net effect of new issues, weaker fund flows, and bond calls and tenders was a $17.1bn mismatch with demand exceeding supply, which helps underpin prices in an otherwise risk-off month.

Defaults were lower in the month, and it was the slowest month for new distressed situations since October 2023. The one default in the month was a repeat offender that is experiencing secular risks within the Media sector. YTD, default activity by number has been concentrated in the Healthcare and Technology subsectors, while the Cable subsector is top of the charts for dollar-amount impacted. On a par basis, HY Default rates are currently 2.63%, and excluding a single, large, distressed Telecom issuer, were only 1.95%.

Loans

Loans reversed in the month with total returns down -0.25% in October, which was the first negative return posting in eight months. Quality relatively outperformed in lockstep by rating. BB loans were +0.02%, Single Bs were -0.10% and CCCs were -3.23%. Loans are up +3.16% YTD. Overall index performance was hurt primarily by Telecom, Cable and Housing. The Loan index yield to a 3-year takeout is 9.56% and the average price is $93.56.

Gross issuance volume declined from $83.4bn in September to $42.1bn in October, as the volatility in the market caused many repricing transactions to pull back. The percentage of loans priced above par fell to 14% by the end of the month, impacting total issuance. Net issuance was still strong, and underwriting banks launched $18bn of M&A and LBO-related loans in the month, down from $31.2bn in September, which made October the 4th largest total of such issuance in 2026. Despite the relatively strong showing for M&A financings, there was a clear bias towards quality in the month that was similar to the pattern for loan returns by ratings. B2-rated and lower issuance struggled to keep pricing at original talk while most B1-rated and higher quality names tended to tighten. This pressure on lower-rated issuers also followed into favorable and less lenient documentation trends for lenders. Technicals within Loans were not as favorable as those of HY. Loan supply was more closely matched with demand and retail inflows remained more favorable for Loans than for HY.

CLOs 

Issuance within Broadly Syndicated CLOs ticked higher in October to $10.5bn from $9.3bn in September. Lower loan prices have drawn-in opportunistic buyers and improved the attractiveness of the arbitrage between current CLO AAA financing costs and BB/Single-B loan spreads. AAA financing spreads have begun to widen because of market volatility during the month. The weighted average cost of capital across the CLO liability stack is approximately 2.3bps wider (more expensive), which reduces equity returns all else equal, but the pace of liability widening is slower than that of asset spreads. Arbitrage for new CLOs has improved anywhere from 5-10bps from local tights in September, thanks to more discount and wider spreads in the loan asset class.

‍

BH Strategy Returns Month QTD 1 Year 3 Year 5 Year 10 Year 20 Year Since Inception
High Yield Composite Gross-0.03-0.033.469.775.136.216.596.50
High Yield Composite Net-0.07-0.073.019.264.645.716.085.99
Bank Loan Composite Gross-0.42-0.424.238.026.98--6.28
Bank Loan Composite Net-0.45-0.453.777.506.46--5.76
Asset Class Month QTD YTD Index
HY Return0.29%0.29%0.33%ICE BAML HY Index
HY BB Return0.90%0.90%-0.84%ICE BAML BB HY Index
HY B Return-0.07%-0.07%0.97%ICE BAML B HY Index
HY CCC Return-2.92%-2.92%-6.25%ICE BAML CCC HY Index
Leveraged Loan Return-0.25%-0.25%3.16%S&P UBS Leveraged Loan Index
LL BB Return0.02%0.02%3.89%S&P UBS Leveraged Loan BB Index
LL B Return-0.10%-0.10%3.82%S&P UBS Leveraged Loan B Index
LL CCC Return-3.23%-3.23%-7.79%S&P UBS Leveraged Loan CCC Index
HYG0.73%0.73%0.39%iShares iBoxx High Yield
BKLN0.57%0.57%2.56%Invesco Senior Loan ETF
S&P 500 Return-0.91%-0.91%11.69%S&P 500
Russell 2000 Return0.58%0.58%14.53%Russell 2000 Index
10 Year Beg5.29%5.29%4.17%10 Year Treasury
10 Year End4.93%4.93%4.93%10 Year Treasury
10 Year Return3.29%3.29%-0.72%10 Year Treasury
Beg Mo Beg QTD Beg Year End of Month
HY YTW8.30%8.30%6.62%8.21%
HY BB YTW7.15%7.15%5.55%6.91%
HY B YTW8.37%8.37%6.78%8.31%
HY CCC YTW16.75%16.75%12.57%17.96%
HY STW327 bps327 bps296 bps359 bps
HY BB STW210 bps210 bps186 bps227 bps
HY B STW337 bps337 bps315 bps371 bps
HY CCC STW1,180 bps1,180 bps892 bps1,343 bps
LL YT3Y9.62%9.62%7.86%9.56%
LL BB YT3Y7.41%7.41%5.79%7.21%
LL B YT3Y9.11%9.11%7.42%9.01%
LL CCC YT3Y23.48%23.48%17.95%25.08%
LL ST3Y482 bps482 bps455 bps510 bps
LL BB ST3Y263 bps263 bps247 bps276 bps
LL B ST3Y432 bps432 bps410 bps455 bps
LL CCC ST3Y1,855 bps1,855 bps1,471 bps2,052 bps

‍

Source: Barrow Hanley. Returns represent an asset-weighted composite of all Bank Loan Fixed Income portfolios or High Yield Fixed Income portfolios. Index returns are shown before transaction costs, management fees, and other expenses. Performance is expressed in U.S. currency. Net-of-fee returns are calculated using a model fee. The model fee is based on a $100 million portfolio using our standard fee schedule. Past performance is not indicative of future results. Inception Date for Bank Loans is June 1, 2018. Inception Date for High Yield is January 1, 2005.

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