This document is intended for institutional investors and is not subject to all of theindependence and disclosure standards applicable to debt research reports prepared for retailinvestors under U.S. FINRA Rule 2242. Barclays trades the securities covered in this report for itsown account and on a discretionary basis on behalf of certain clients. Such trading interestsmay be contrary to the recommendations offered in this report.Please see analyst certifications and important disclosures beginning on page 27.US Credit AlphaWait and see for the Fed, but not forcreditWe discuss BBB-A relative value in investment grade, theimplications of the market's pricing to maturity in highyield, longer-duration alternatives to IG corporates in ABS, andCRE CLOs in CMBS. US Credit AlphaOverview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3The Fed is signaling caution about its next move. However, the credit markets are quite upbeat,with strong yield-driven demand. Heavier-than-expected issuance has been well received, andspreads in secondary markets have rallied close to three-year tights.Investment GradeA shift to single-As. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Beta compression has been a central theme in credit markets since December. As a result, wethink 5y and 10y BBB industrials have compressed too much and see better value in single-As.We highlight basket trades along this theme.High YieldMore yield than meets the eye. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Most of high yield is being priced to maturity because of low dollar prices. Since issuers rarely letbonds turn current, we think investors should prefer yield-to-current metrics over YTW. Re-racking index yields to account for this enhances the yield offering of high yield by around 45bp,which should support demand.Securitized CreditABS: Finding duration in ABS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14We find value in AAA rate reduction ABS compared with IG corporates for investors looking forduration.FICC ResearchCredit Strategy23 February 2024FOCUSBradley Rogoff, CFA+1 212 412 7921bradley.rogoff@barclays.comBCI, USDominique Toublan+1 212 412 3841dominique.toublan@barclays.comBCI, USCompleted: 22-Feb-24, 21:58 GMT Released: 23-Feb-24, 11:30 GMTRestricted - ExternalSecuritized CreditCMBS: CRE CLO conundrum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Performance has weakened meaningfully, causing some deals to fail triggers. Although manymanagers are no longer buying out all the defaulted loans, some are supporting their deals bytopping up collection accounts. Hefty credit suppo...
