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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Franklin High Income Fund delivered 2.19% in Q2 2026 as resilient corporate fundamentals and active capital markets supported high-yield bonds despite hawkish Fed commentary. Default rates remain below historical averages at 2.67%, while fund inflows totaled $2.3 billion in June."
Franklin High Income Fund posted a 2.19% return in Q2 2026, benefiting from a ratings-quality tilt that favored Ca and B rated bonds and strategic industry allocations including overweights to finance and underweights to media cable and supermarkets. The US high-yield market delivered solid returns throughout the quarter as investors remained positive on active capital markets and progress toward resolving the Middle East conflict, despite hawkish Federal Reserve commentary. The US high-yield default rate increased modestly to 2.67% but remains below long-term averages, supported by wide open capital markets that generated $2.3 billion in fund inflows during June. Corporate fundamentals have remained resilient through the first half of 2026, and the fund expects these trends to persist with potential volatility from policy implementation and geopolitical tensions. Spreads remain rich historically but appropriate given the low default environment. The fund continues focusing on balance sheet health, free cash flow generation, and credit resiliency while maintaining caution on deeply distressed names. Yields and sub-par dollar prices remain attractive, though spreads are fair but not compelling.
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