What is it that we expect for the Fed to do here when it comes to rates? And what is that probably going to do to credit markets and more specifically, leveraged finance markets? So, you know, the Fed was previously expecting to raise rates by about 75 basis points, potentially take rates to probably that 3.75 to 400 basis points in 2023. Expectations now are actually that rates come off a tad from that. In terms of the upper bound by 2023, we're probably thinking more about that 3 and 1/2 range. And really where is the Fed was thinking about more of 100 basis points of increase here at this next Fed meeting, we're actually thinking it's probably going to be closer to 75. A lot of indications on the inflation side or actually starting to turn around, whether it's the job market, early indications of stress there or even in terms of rents. While we are seeing nationwide rents rise, there are some indications that you're going to potentially see more supply, perhaps on the multifamily side, but also in terms of single family housing. Well, the spec builds out there. And so as a result, you know, our expectation is rate increases probably are not going to pace at the level they were given what expectations were in the last couple of months. So what does that mean for leveraged finance markets in terms of how balance sheets are going to handle that? So one of the better markets to look at is actually high yield because of the prevalence of data that you can actually take a look at. And so if you were to assume we kind of top out that 3 and 1/2 rate and take a look at what that does to coverage ratios, what you'll see is buy quality level across high yield. For example, with double B's, you probably see about 12% of free cash flow eaten up by rising rates. If you swing down to single B's, you actually see probably close to 24 to 25% of free cash flow eaten up with triple C's. It's a little bit different. Most of the cash flow of CCC is that free cash flow. Triple C's is actually eaten up by rate hikes, but notice at least 90% of the market or so has good resiliency in terms of rate hikes relative to free cash flow for these companies just by virtue of the double B's and the single B's. If the Fed is more aggressive on the up side and inflation does not subside in some of the numbers that we are seeing and we do see the Fed get pushed rates all the way up to 4% wanted. Do you think there would be one, an inverted yield curve, which would significantly slow the velocity of money? Now, when it comes to the direct impact on high yield, we do think that there would be really got to focus on the fundamentals. Now, high yield has really migrated to a much higher quality index than it had been in the past. In 2007, about 35% of the index was double B's. Now that's about fifth, a little over 50% And so when we step back and look at just the quality of the high yield index, the quality is so much greater than what it has been in the past. So I do think from a fundamental aspect, there's not as much fundamental volatility within the panels and the balance sheets of high yield companies. And as Chad had mentioned earlier, we just went through COVID. When you think about management teams, we're very defensive. From March 2020 upwards to basically summer of 2021, the liquidity levels on balance sheets are still at historically high levels. So there is a lot of defensive ability within these balance sheets on top of a lower volatility from just a high level perspective. And then also looking backwards for a couple of decades to prove the point on a higher quality high yield index, you know, you've seen margins drift higher over time. And CapEx requirements drift lower while leverage levels has basically stayed at roughly the same level. So when it comes to cash flow conversion and the ability to service debts, high yields, it's an extremely good spot. And then as Fed raises rates over time, high yield issuers do have fairly low floating rate exposure overall. And so their direct impact to the channel is less than the leveraged loan issuers themselves. So that ability to service that debt is just extended longer until they actually end up having to refi, refi their debt. And I'm touching on kind of that refi wall is like the last kind of four or five years. High yield companies have really used this low rate environment to push out maturities. So we don't have a lot of near-term maturities that companies have to deal with. Now Higher rates and higher economic volatility, pressure on margins that will impact on the margin, the high yield companies. But that's where active management comes into play and where basically solid fundamental analysis, picking good companies, you'll have good returns with significantly less risk. When you look at the defaults environment, you know, it tends to really be driven by the CCC exposure in. And the index where, we just philosophic kind of run a little bit lower triple C's and take that CCC exposure when it makes sense to do so.
