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HIGH YIELD STILL IN A SWEET SPOT…FOR NOW



High-Yield-is-in-a-Sweet-Spot...for-now
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Those who follow me know that I am not too keen on high yield for many reasons. Fundamentally, leverage metrics are increasing, issuance for both high yield and syndicated loans has been robust, and more importantly, given their tight spreads to artificially low treasury yields, the sector is increasingly exposed to interest rate risk. However, from a historical perspective, high yield has been a considerable outperformer in rising rate environments, and the current spread of 347 bps over treasuries has been a sweet spot. Consider the following chart.

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