Post-Liberation Day Scoreboard: Tactical OW HY
Zachary Griffiths, CFA - Head of IG & Macro Strategy, CreditSights
Winnie Cisar - Global Head of Strategy, CreditSights
Brian Perez - Analyst, Credit Strategy, CreditSights
Kathleen Tang - Analyst, Strategy, CreditSights
8 April 2025
US IG and HY credit spreads reached 120 bp and 461 bp, respectively, on April 7. HY spreads are now within a range considered reasonable during the Trump 1.0 Trade war (450-500 bp), while US IG remains relatively tight compared to the Trump 1.0 range of 150-160 bp. The current stance suggests potential for spreads to widen further absent negotiation progress. Historical data since 1997 indicates IG spreads are at the 41st percentile, whereas HY spreads are near the long-term median.
The 110 bp and 350 bp year-end forecasts for US IG and HY spreads remain unchanged. There is significant cash in the system, corporate balance sheets are strong, and inflows could potentially narrow spreads by year-end, barring a recession.
The mix of factors presents a compelling opportunity for US HY, with all-in yields considered attractive even for higher quality trades.
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