Barclays_US_Credit_Alpha_Wait_and_see_for_the_Fed_but_not_for_credit

FICCResearchCreditStrategy23February2024USCreditAlphaFOCUSWaitandseefortheFed,butnotforBradleyRogoff,CFAcredit+12124127921bradley.rogoff@barclays.comWediscussBBB-Arelativevalueininvestmentgrade,theBCI,USimplicationsofthemarket'spricingtomaturityinhighyield,longer-durationalternativestoIGcorporatesinABS,andDominiqueToublanCRECLOsinCMBS.+12124123841dominique.toublan@barclays.comUSCreditAlphaBCI,USOverview........................................................3TheFedissignalingcautionaboutitsnextmove.However,thecreditmarketsarequiteupbeat,withstrongyield-drivendemand.Heavier-than-expectedissuancehasbeenwellreceived,andspreadsinsecondarymarketshaveralliedclosetothree-yeartights.InvestmentGradeAshifttosingle-As................................................5BetacompressionhasbeenacentralthemeincreditmarketssinceDecember.Asaresult,wethink5yand10yBBBindustrialshavecompressedtoomuchandseebettervalueinsingle-As.Wehighlightbaskettradesalongthistheme.HighYieldMoreyieldthanmeetstheeye.....................................9Mostofhighyieldisbeingpricedtomaturitybecauseoflowdollarprices.Sinceissuersrarelyletbondsturncurrent,wethinkinvestorsshouldpreferyield-to-currentmetricsoverYTW.Re-rackingindexyieldstoaccountforthisenhancestheyieldofferingofhighyieldbyaround45bp,whichshouldsupportdemand.SecuritizedCreditABS:Findingdurat...