Aperture Credit Opportunities Fund: Commentary for Q3 2023

Quarter in Review

Credit markets struggled this quarter, with the culprit being the steadily rising yields in the US Treasury market. During July and August, investors held their nerve. They were comforted by maintaining a view that lower inflation combined with a more robust economy would result in a soft landing and that, consequently, spreads were able to absorb the pain. US 10-year yields, having risen from 3.85% in early July, reached 4.11% as we entered September. In September, they rocketed to end the month at 4.6%. This latter move was driven by a realization that rates would, indeed, most likely remain higher for longer as well as by a concern that the US economy was re-accelerating. The sequitur being that the chances of the Fed engineering a hard landing has significantly risen, and credit markets have begun pricing in higher default risk. To exacerbate the market headwinds, oil rallied from ~$80 to >$90 per barrel during the month.

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