Barclays_US_Credit_Alpha_Groundhog_Day

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 28.US Credit AlphaGroundhog DayThis week, we update our monthly systematic credit riskfactor recommendations. We also discuss our small cap bestideas in investment grade and compare performance of highyield bonds and leveraged loans in the same sector since thewides of April. US Credit AlphaOverview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Signs of stagflation have crept back into the ISM data, and employment data were mixed thisweek. Investors' attention on Washington has shifted from tariff policy to the budget bill,particularly Section 899. We think spreads are likely to grind tighter in the near term.US FocusSystematic Credit: Barclays Credit Factor Insights: June 2025; Cyclicalsto Positive and Momentum to Negative in US HY. . . . . . . . . . . . . . . . . . . . . 4In US high yield, we upgrade cyclicals to positive, downgrade momentum to negative anddowngrade volatility to neutral. We reaffirm our other views in US HY and across US IG.Investment GradeSmall Cap Best Ideas: Don't be fooled by their size. . . . . . . . . . . . . . . . . . 19Small cap issuers are less followed by market participants, as 93% of the corporate universe canbe attributed to issuers with more than $2.5bn of debt. Recent trends have increased liquidity inthis space, though, and they can add to portfolio returns. We highlight trade ideas in small capissuers.US High Yield & Leveraged LoansSector performance amid the beta rally. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Lower quality has outperformed in both bonds and loans since the Liberation Day wides.However, ratings differentials matter when comparing bond and loan performance of the samesector. Tech and healthcare bonds appear to have outperformed loans on a ratings-adjustedbasis. FICC ResearchCredit Strategy6 June 2025SIGNATUREBradley Rogoff, CFA+1 212 412 7921bradley.rogoff@barclays.comBCI, USDominique Toublan+1 212 412 3841dominique.toublan@barclays.comBCI, USCompleted: 06-Jun-25, 00:24 GMT Released: 06-Jun-25, 10:30 GMTRestricted - ExternalUS Credit AlphaOverviewSigns of stagflation have crept back into the ISM data, andemployment data were mixed this week. Investors' attentionon Washington has shifted from tariff policy to the budget bill,particularly Section 899. We think spreads are likely to grindtighter in the near term.Groundhog DayStagflation talk resurfaces. Concerns about stagflation are creeping back into markets,espec