Corporate credit / BB-rated bonds Bullish ▲

Hay (Jun 19 POW!): extending past equities into credit — the pick is the Macy's (M) 6.7% senior note due 7/15/2034: BB+, ~7.45% YTM at 95.474 (~290bp over USTs). BB-rated bonds are Haymaker's "favorite slice" of the corporate market (sub-1% historic default rate yet high-yield coupons — the "BB anomaly" / fallen-angel effect, where academic studies show the best risk-adjusted returns in corporate credit). The M credit is asset-covered (CoStar real estate $7.9–10.5B > its $6.5B market cap, also covering $5.1B debt), FCF up double-digits two years running (~$1.4B 2026E), with a Change-of-Control LBO "poison put"; Berkshire's ~1% equity stake is a vote of confidence. He believes the bond's return can beat the S&P 500 total return over the rest of the decade — "a low-risk way to secure what is essentially a 7½% yield for many years." Hay (Jul 21, "Are the Canaries Getting Woozy?"): the headline corporate/Treasury spread is still extremely tight (investors "remain in a risk-tolerant mood"), but within junk the BB-vs-CCC gap is a canary in the coal mine — now ~800 bps, a surge of ~300 bps from last summer's tights, the widest since the 2022 dual stock/bond bear and "threatening to break above three-year resistance." Whether it's an early warning "is open for debate," but it bears monitoring (BB = highest-grade junk, CCC = the lowest rung before default) — a caution on the low-quality tail, not a change to the favored-BB stance. Paulo Macro (Jul 21, the counter-caution): BB spreads have kept tightening (~175→~150bps since December) but partly as a flow artifact — the crap migrated from junk to private credit post-Covid — while ORCL has decoupled ABOVE the BB complex; a fallen-angel downgrade ($120bn, ~7% of HY) would force HY managers at all-time-tight spreads to "make room and sell paper," widening the whole complex — the tight BB print masks single-name IG→junk migration risk. Chanos (Risk Reversal, Jul 17, the bearish rhyme): the AI/CRE fragility is rates — everyone pencils deals at 5–7 caps with the 10-year at 4.5% and levers (plus "crazy mezzanine") to promised 15s; rates at 6–7% "blows up asset class after asset class" (SL Green's 5-cap NYC office the bellwether — the stock flat for 25 years). His line of demarcation: acceleration toward 5% "with some vigor" = credit investors rethink and spreads widen; CCCs are already widening while BB/BBB are not — and he's short one big (unnamed) private-equity entity with exactly that office/low-cap-rate exposure. Hay (Jul 26): the BB-vs-CCC spread has widened ~300bp and "look[s] like they're on the verge of a multi-year breakout. I think they will break out." BB is "high-grade junk… less than 1% defaults per year"; CCC is "right on the door of default" — a within-junk quality signal that fires even while investment-grade spreads are very tight ("no warning sign at all" there). "These breakouts work with the bond market too, and with currencies." Paulo Macro (Jul 30) — the IG counterpoint: the new-issue-vs-secondary diagnostic says the investment-grade regime has already flipped. Structure: fixed income is more passive than equities (active IG managers hug 6.3–7.0yr vs a 6.6 index duration — "anything outside of that is too much career risk"), new issues enter the index only at month end, so the marginal buyer is "active guys and fast money hedge funds"; new issues always come at a concession to secondary, and "in bull markets new-issue spreads tighten towards secondary; in bear markets secondary widens towards new-issue levels." UBS: new-issue premiums 7.0bps in July vs 3.1bps 2026 YTD (3.0 in 2025); oversubscription 3.1× vs 4.0× YTD; July issuance $53.45bn against a $111.6bn initial estimate — despite $83.4bn of net IG inflows YTD, i.e. the strain is in price, not demand. 2026-AUG-15 — Rick Rieder: "high yield should be trading 150, 200 base points lower in yield. It's not because we have an inflation issue… these real rates make corporate investing pretty attractive today" — the elevated yield sits in the real-rate base, not a deteriorating spread. Runs BINC at ~6.80% yield, A− average rating, under 3 years of duration (high yield + EM + securitized, "more Europe than the U.S.") — "today you don't have to stretch because these real rates are so high." Construction rule: "my upside is they pay you back," so build it "as boring as possible" and "diversify it like crazy." AUG-16 (Jay Singh, SSR): the annual benchmark test on the income book. Year-to-date plain-vanilla fixed income is "absolutely abysmal" — bank loans +2%, EM bonds +1.8%, local +1.8%, EMD +1.7%, high yield +1.5%, munis +0.4%, MBS −0.5%, investment grade −1%, treasuries −1% — against "our prefs have been up mid-high single digits on the year… our pref book has outperformed almost every single fixed income class in the IG space, and in the high yield space." He circulated Fidelity's August US fixed-income review specifically "because it shows how much prefs have done better than fixed income." 2026-SEP-07 (Jay Singh) sizes the CCC scare rather than amplifying it: “Triple-C US corporate credit spreads have been breaking out for the last four months” to ~13% yields on the JPM index and ~15% on BofA's — “but that's only 10% of high yield. So if high yield's $1.5tn, this is $150bn. And if you see defaults even at 10% of $150bn, you're only going to get $15bn, which is nothing… high yield defaults meant a lot more in 2008 versus now, because the equity market's just so much bigger than the high yield debt market.” The equity trigger he does watch is a level: JPMorgan's 5% 10-year — “we're only 20 bips from there right now.”