US High-Yield Newsletter – 2025

The US high-yield market has transitioned to an income-driven phase, where carry matters more than price upside, and credit selection is driving returns. BB and upper-B credits are outperforming on the back of stronger balance sheets and dependable refinancing access, while CCC credits lag due to higher funding costs and liquidity risk. Issuance in 2025 has been concentrated in Consumer Discretionary, Communications, Energy, and Materials, largely reflecting refinancing and liability management rather than operating stress. With limited room for spread compression, returns are increasingly defined by credit quality and disciplined positioning.