U.S. High-Yield Market Observations: Valuations, Real Asset Sectors and the AI Build-Out

Key Takeaways:

• High-yield credit spreads are expensive relative to historical standards, highlighting the need for an active management approach.
• We maintain a preference for "up in quality" positioning within BBB and BB segments. In general, we believe securities in the lower B and CCC segments do not offer adequate compensation for credit risk.
• In our view, the increase in power demand from AI applications has the potential to provide significant benefits to the utilities and midstream high-yield sectors.

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