Weekly Market Summary

January 16-20, 2023

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Extra Credit*

• In 2022, $623 billion of investment grade corporate bonds were upgraded, of which $567b were within investment grade and $55b migrated from high yield to investment grade. In percent terms, 9.2% of investment grade debt was upgraded, of which 8.4% occurred within investment grade and 0.8% turned rising stars.

• During the full year 2022, $161b of investment grade bonds were downgraded of which $151bn (94%) stayed in investment grade and $10b fell to high yield. In percent terms, 2.4% of investment grade debt was downgraded, of which 2.2% occurred within investment grade and 0.2% fell to high yield.

• Bank loan maturity walls were still way out, as only 23.7% of the loan market is set to mature before 2026, while 30.7% of the loan market is set to mature in 2028. Currently, 100% of the loans set to mature in 2028 have a LIBOR floor with a median floor of 0.50% vs. 0.00% for the loans set to mature before 2026.

• Short-term investment grade corporate bonds currently have a yield-to-worst of 4.87% with a duration of 1.86 years vs. 4.18% and 6.30 years for the Bloomberg US Aggregate Bond Index. (As of 1/18/23)

• The trailing 12-month default rate for high yield bonds and bank loans finished 2022 at 1.6% and 1.6%, well below their long-term average of 3.2% and 3.1%.

Yield as of:
01/20/2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
8.19%
10.27%
4.93%
Prior Week
8.10%
10.31%
4.96%
Start of the Year
8.96%
10.69%
5.34%
Option Adjusted Spread as of:
01/20/2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
424 bps
545 bps
115 bps
Prior Week
407 bps
552 bps
116 bps
Start of the Year
469 bps
592 bps
121 bps
Prices as of:
01/20/2023
High-Yield Bonds
Bank-Loans
Investment-Grade Corporates
Last Week
$89.10
$93.29
$92.31
Prior Week
$89.44
$93.10
$92.23
Start of the Year
$86.22
$91.89
$89.37

*Source: Morningstar®, Bloomberg, Credit Suisse. OAS is Options Adjusted Spread. 4-year discount margin is used for spread for bank loans. Yield quoted is yield-to-worst or equivalent calculation. YTD Low / High for yields are based on end of week and not intraday movements. Indexes and sub-indexes: Investment-grade corporates represented by Bloomberg US Corporate Bond Index. High-yield bonds represented by Bloomberg US Corporate High Yield Index. Bank loans represented by Credit Suisse Leverage Loan Index.

For Financial Professional Use Only

Past performance does not guarantee future results. Index performance is not indicative of fund performance.

All investing involves risks including the possible loss of the principal amount invested.

Pacific Life Insurance Company is the administrator for Pacific Funds. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products.

Investors should consider a fund’s investment goal, risks, charges, and expenses carefully before investing. The prospectus and/or the applicable summary prospectus contain this and other information about the Fund and are available from PacificFunds.com. The prospectus and/or summary prospectus should be read carefully before investing.

Pacific Funds are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company (Newport Beach, CA), and are available through licensed third parties. Pacific Funds refers to Pacific Funds Series Trust.

Mailing address: P.O. Box 9768, Providence, RI 02940-9768 (800) 722-2333 • www.PacificFunds.com

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