High-Yield
Corporate health remains supportive of tight credit spreads in both the US and Europe, but a growing divide is emerging beneath the surface. Investment-grade issuers continue to strengthen, while lower-rated borrowers face mounting pressures. Credit markets are pricing resilience, leaving investors vulnerable should corporate fundamentals begin to deteriorate.
The divergence across frontier markets is likely to widen. Kenya, Kazakhstan, and Sri Lanka are well placed to outperform, while Pakistan is vulnerable. We offer several trade ideas to capture this divergence.
We recommend increasing exposure to spread product as the US economy transitions back into a low rate vol regime.
