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Update

Barrow Hanley Credit Partners Monthly Market Update | Credit markets respond to rising power costs and policy strain

In this post:

12.12.2025
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Executive Summary

  • The U.S. government reopened after the longest shutdown on record, but funding only extends through January, keepingpolicy uncertainty elevated.
  • AI remained a key market driver as Nvidia’s results reaffirm strength, though bottlenecks are shifting from compute availability to power infrastructure and risingelectricity costs.
  • China’s economic share continues to decline, even as its AI firms narrow the gap with U.S. peers and benefitfrom significantly lowerpower costs and much largerelectricity capacity.

Market Recap

The government reopened mid-way through November after being closed all of October, marking an end to the longest government shutdown in history. The reopening is only agreed upon through the end of January, so there is continued uncertainty ahead.

While the AI market narrative continued to be questioned in November, Nvidia’s earnings showed the world that the it can continue to drive the market, at least for a little while longer. In the race for AI dominance, the US clearly has the lead, with American companies owning most of the IP and hardware building blocks. In fact, the biggest risk to the US economy is a decline in the AI wave. AI capital expenditure has contributed as much as 1% to GDP growth. Microsoft’s CEO recently noted that AI growth is starting to be limited by power availability rather than compute power. “The biggest issue we are now having is not a compute glut, it’s the power and the ability to get the builds done fast enough close to power [supplies],” says Microsoft’s CEO Satya Nadella. He goes on to add, “If you can’t do that, you may actually have a bunch of chips sitting in inventory that I can’t plug in.”

A new risk for market growth may be electricity prices. Edison Electric Institute highlighted that US utilities will invest $1.1 trillion in the next 5 years, double what was invested in the last 10 years. These investments will push electricity prices higher.

Ambrose Evans-Pritchard of The Daily Telegraph highlighted that China’s share of global GDP has shrunk for the fourth year in a row, slipping from 17.4% to 16.7% in 2024. He cites Mark William of Capital Economics, who argues “there is mounting evidence that [China’s] industrial policy is itself to blame.” Productivity has lagged relative to the US since Xi took power in 2012, likely the result of the party’s focus on a few key industries, which has distorted the broader economy. Meanwhile, China’s Deepseek is not far behind its American rivals and doing so with a fraction of the energy use and computing power. China has made great strides in electricity capacity and now surpasses the US electricity generation, currently doubling US capacity. China’s capacity comes with a cost advantage, as seen in the charts from Gavekal below. Electricity gives Chinese tech companies an advantage. However, US companies have an intellectual property advantage that more than offsets this dynamic, for now.

High Yield

High Yield was up 0.50% overall but spent most of November in negative return territory until the week of the month. Spreads and yields immediately widened out to start the month with yields jumping ~20bps to over 7%. Yields stayed around 7% before declining in the last week to 6.71%. Spreads ended at 307 bps, tighter by 3 bps for the month, but almost 30 bps tighter than the intramonth wide. Single-Bs outperformed other rating cohorts with a 0.71% return, followed closely by BBs at 0.64%. CCCs materially underperformed with a -0.93% return. Rates helped push HY returns for the month, with 5-year treasuries down 9 bps to 3.60%. Flows for the month were negative in HY with $1.2bn in outflows. This follows $21bn of inflows in the prior 6 months.

Loans

Loans were up 0.21%, underperforming longer-duration assets. BB Loans outperformed posting a +0.48% return in the month, followed by Single-Bs up 0.20%. Like HY, CCC Loans struggled and finished down -1.84%. Yields on loans ended at 7.87%, flat sequentially, with spreads widening 11 bps to 465 bps. Even with the probabilities of a December rate cut being reduced throughout the month, the forward SOFR curve declined roughly 5bps across the curve. The average Loan price declined for the 4th month in a row. November saw a $0.26 price decline to $95.86, and $0.85 off the July high of $96.71. Loans saw some decent variability among industry returns with Aerospace up 0.94% for the month while Chemicals were down -1.40%

Private Credit

A large private credit manager attempted to merge two private credit portfolios during the month, resulting in a very negative reaction from investors. One is a private BDC offering the ability for investors to redeem their capital over time at NAV and the other is a publicly traded BDC that trades at a 20% discount to NAV. If the merger had been completed, it would have given the private BDC investors the ability to sell their interests, but likely at the current NAV discount of the publicly traded BDC, a 20% discount assuming it held steady post-merger. The publicly traded BDC declined 9% during this period. The Manager in this case is also a publicly traded equity, which declined in value over 11% over those handful of days in early November. The manager highlighted that the portfolios have a 98% overlap in investments. Given this negative reaction, the manager cancelled the plans to merge the two entities.

There were articles written in the month highlighting price discrepancies between funds for the same asset. We have seen a handful of these recently, but the asset highlighted in this case was a broadly syndicated loan with multiple markets. This article highlighted that one manager had this marked at 89 cents, while a few others had it marked at 60. Meanwhile, the bids for where any holder could sell the loan were around 50 cents.

Returns as of November 30, 2025
BH Strategy Returns Month QTD 1 Year 3 Year 5 Year 10 Year 20 Year Since Inception
High Yield Composite Gross 0.87% 0.77% 8.19% 10.89% 6.30% 6.95% 6.83% 6.66%
High Yield Composite Net 0.83% 0.69% 7.68% 10.36% 5.80% 6.44% 6.32% 6.15%
Bank Loan Composite Gross 0.57% 0.70% 6.72% 10.53% 7.67% -- -- 6.56%
Bank Loan Composite Net 0.53% 0.62% 6.19% 9.98% 7.14% -- -- 6.04%
Asset Class Month QTD YTD Index
HY Return0.50%0.70%7.80%ICE BAML HY Index
HY BB Return0.64%1.11%8.42%ICE BAML BB HY Index
HY B Return0.71%0.65%7.42%ICE BAML B HY Index
HY CCC Return-0.93%-1.35%5.61%ICE BAML CCC HY Index
Leveraged Loan Return0.21%0.51%5.22%S&P UBS Leveraged Loan Index
LL BB Return0.48%0.95%5.64%S&P UBS Leveraged Loan BB Index
LL B Return0.20%0.51%5.21%S&P UBS Leveraged Loan B Index
LL CCC Return-1.84%-2.23%1.42%S&P UBS Leveraged Loan CCC Index
HYG0.75%0.74%8.06%Ishares Iboxx High Yield
BKLN0.67%1.11%5.95%Invesco Senior Loan ETF
S&P 500 Return0.25%2.59%17.81%S&P 500
Russell 2000 Return0.96%2.79%13.47%Russell 2000 Index
10yr Beg4.08%4.15%4.57%10yr Treasury
10yr End4.02%4.02%4.02%10yr Treasury
10yr Return1.01%1.80%8.86%10yr Treasury
Beg Mo Beg QTD Beg Year End of Month
HY YTW6.82%6.73%7.47%6.71%
HY BB YTW5.71%5.75%6.43%5.59%
HY B YTW6.93%6.75%7.54%6.81%
HY CCC YTW12.37%11.78%11.87%12.58%
HY STW310 bps299 bps310 bps307 bps
HY BB STW197 bps198 bps205 bps194 bps
HY B STW322 bps304 bps318 bps319 bps
HY CCC STW867 bps814 bps751 bps897 bps
LL YT3Y7.87%7.82%8.79%7.87%
LL BB YT3Y5.90%5.93%6.65%5.78%
LL B YT3Y7.48%7.43%8.36%7.48%
LL CCC YT3Y17.41%16.72%18.04%17.77%
LL ST3Y454 bps451 bps475 bps465 bps
LL BB ST3Y256 bps261 bps261 bps255 bps
LL B ST3Y415 bps411 bps432 bps426 bps
LL CCC ST3Y1415 bps1351 bps1406 bps1465 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 us-ing 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 materi-al, 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.

Credit Suisse Index data is permissible for use by Barrow Hanley for client reporting and marketing purposes. This data is not permitted to be re-distributed.

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.

214.665.1900
contactus@barrowhanley.com

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Barrow Hanley Global Investors
2200 Ross Avenue
31st Floor Dallas, TX 75201
www.barrowhanley.com

12.12.2025
Follow us:

Market Recap

The government reopened mid-way through November after being closed all of October, marking an end to the longest government shutdown in history. The reopening is only agreed upon through the end of January, so there is continued uncertainty ahead.

While the AI market narrative continued to be questioned in November, Nvidia’s earnings showed the world that the it can continue to drive the market, at least for a little while longer. In the race for AI dominance, the US clearly has the lead, with American companies owning most of the IP and hardware building blocks. In fact, the biggest risk to the US economy is a decline in the AI wave. AI capital expenditure has contributed as much as 1% to GDP growth. Microsoft’s CEO recently noted that AI growth is starting to be limited by power availability rather than compute power. “The biggest issue we are now having is not a compute glut, it’s the power and the ability to get the builds done fast enough close to power [supplies],” says Microsoft’s CEO Satya Nadella. He goes on to add, “If you can’t do that, you may actually have a bunch of chips sitting in inventory that I can’t plug in.”

A new risk for market growth may be electricity prices. Edison Electric Institute highlighted that US utilities will invest $1.1 trillion in the next 5 years, double what was invested in the last 10 years. These investments will push electricity prices higher.

Ambrose Evans-Pritchard of The Daily Telegraph highlighted that China’s share of global GDP has shrunk for the fourth year in a row, slipping from 17.4% to 16.7% in 2024. He cites Mark William of Capital Economics, who argues “there is mounting evidence that [China’s] industrial policy is itself to blame.” Productivity has lagged relative to the US since Xi took power in 2012, likely the result of the party’s focus on a few key industries, which has distorted the broader economy. Meanwhile, China’s Deepseek is not far behind its American rivals and doing so with a fraction of the energy use and computing power. China has made great strides in electricity capacity and now surpasses the US electricity generation, currently doubling US capacity. China’s capacity comes with a cost advantage, as seen in the charts from Gavekal below. Electricity gives Chinese tech companies an advantage. However, US companies have an intellectual property advantage that more than offsets this dynamic, for now.

High Yield

High Yield was up 0.50% overall but spent most of November in negative return territory until the week of the month. Spreads and yields immediately widened out to start the month with yields jumping ~20bps to over 7%. Yields stayed around 7% before declining in the last week to 6.71%. Spreads ended at 307 bps, tighter by 3 bps for the month, but almost 30 bps tighter than the intramonth wide. Single-Bs outperformed other rating cohorts with a 0.71% return, followed closely by BBs at 0.64%. CCCs materially underperformed with a -0.93% return. Rates helped push HY returns for the month, with 5-year treasuries down 9 bps to 3.60%. Flows for the month were negative in HY with $1.2bn in outflows. This follows $21bn of inflows in the prior 6 months.

Loans

Loans were up 0.21%, underperforming longer-duration assets. BB Loans outperformed posting a +0.48% return in the month, followed by Single-Bs up 0.20%. Like HY, CCC Loans struggled and finished down -1.84%. Yields on loans ended at 7.87%, flat sequentially, with spreads widening 11 bps to 465 bps. Even with the probabilities of a December rate cut being reduced throughout the month, the forward SOFR curve declined roughly 5bps across the curve. The average Loan price declined for the 4th month in a row. November saw a $0.26 price decline to $95.86, and $0.85 off the July high of $96.71. Loans saw some decent variability among industry returns with Aerospace up 0.94% for the month while Chemicals were down -1.40%

Private Credit

A large private credit manager attempted to merge two private credit portfolios during the month, resulting in a very negative reaction from investors. One is a private BDC offering the ability for investors to redeem their capital over time at NAV and the other is a publicly traded BDC that trades at a 20% discount to NAV. If the merger had been completed, it would have given the private BDC investors the ability to sell their interests, but likely at the current NAV discount of the publicly traded BDC, a 20% discount assuming it held steady post-merger. The publicly traded BDC declined 9% during this period. The Manager in this case is also a publicly traded equity, which declined in value over 11% over those handful of days in early November. The manager highlighted that the portfolios have a 98% overlap in investments. Given this negative reaction, the manager cancelled the plans to merge the two entities.

There were articles written in the month highlighting price discrepancies between funds for the same asset. We have seen a handful of these recently, but the asset highlighted in this case was a broadly syndicated loan with multiple markets. This article highlighted that one manager had this marked at 89 cents, while a few others had it marked at 60. Meanwhile, the bids for where any holder could sell the loan were around 50 cents.

Returns as of November 30, 2025
BH Strategy Returns Month QTD 1 Year 3 Year 5 Year 10 Year 20 Year Since Inception
High Yield Composite Gross 0.87% 0.77% 8.19% 10.89% 6.30% 6.95% 6.83% 6.66%
High Yield Composite Net 0.83% 0.69% 7.68% 10.36% 5.80% 6.44% 6.32% 6.15%
Bank Loan Composite Gross 0.57% 0.70% 6.72% 10.53% 7.67% -- -- 6.56%
Bank Loan Composite Net 0.53% 0.62% 6.19% 9.98% 7.14% -- -- 6.04%
Asset Class Month QTD YTD Index
HY Return0.50%0.70%7.80%ICE BAML HY Index
HY BB Return0.64%1.11%8.42%ICE BAML BB HY Index
HY B Return0.71%0.65%7.42%ICE BAML B HY Index
HY CCC Return-0.93%-1.35%5.61%ICE BAML CCC HY Index
Leveraged Loan Return0.21%0.51%5.22%S&P UBS Leveraged Loan Index
LL BB Return0.48%0.95%5.64%S&P UBS Leveraged Loan BB Index
LL B Return0.20%0.51%5.21%S&P UBS Leveraged Loan B Index
LL CCC Return-1.84%-2.23%1.42%S&P UBS Leveraged Loan CCC Index
HYG0.75%0.74%8.06%Ishares Iboxx High Yield
BKLN0.67%1.11%5.95%Invesco Senior Loan ETF
S&P 500 Return0.25%2.59%17.81%S&P 500
Russell 2000 Return0.96%2.79%13.47%Russell 2000 Index
10yr Beg4.08%4.15%4.57%10yr Treasury
10yr End4.02%4.02%4.02%10yr Treasury
10yr Return1.01%1.80%8.86%10yr Treasury
Beg Mo Beg QTD Beg Year End of Month
HY YTW6.82%6.73%7.47%6.71%
HY BB YTW5.71%5.75%6.43%5.59%
HY B YTW6.93%6.75%7.54%6.81%
HY CCC YTW12.37%11.78%11.87%12.58%
HY STW310 bps299 bps310 bps307 bps
HY BB STW197 bps198 bps205 bps194 bps
HY B STW322 bps304 bps318 bps319 bps
HY CCC STW867 bps814 bps751 bps897 bps
LL YT3Y7.87%7.82%8.79%7.87%
LL BB YT3Y5.90%5.93%6.65%5.78%
LL B YT3Y7.48%7.43%8.36%7.48%
LL CCC YT3Y17.41%16.72%18.04%17.77%
LL ST3Y454 bps451 bps475 bps465 bps
LL BB ST3Y256 bps261 bps261 bps255 bps
LL B ST3Y415 bps411 bps432 bps426 bps
LL CCC ST3Y1415 bps1351 bps1406 bps1465 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 us-ing 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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