Barclays_HY_Research_US_High_Yield_Best_Ideas_Back_in_Black

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 31.US High Yield Best IdeasBack in BlackKey points: 1) "Everything rally" puts HY at tightest startingspread since index inception; 2) We outline 29 Overweights,9 Underweights, 2 swaps, 6 term loan trades, and 1 CDStrade. 3) Suggest looking at hybrids over BBs; 4) "K Shaped"HY market w/lower quality tail cheap, skewing index spreads.OverviewWhile the market yield of 6.5% provides some cover, we are conscious that 2026 is starting off atthe tightest spread level since the HY Index's inception. It's possible the rock gods at AC/DC hadit right when they sang "Don't try to push your luck, just get out of the way" in "Back in Black".Given the starting point, credit selection and avoiding foot faults is the base line for preventingunderperformance. There are a number of ongoing larger sector trends that we believe willremain drivers, including the structural pressure in chems, AI funding, paper/packaging on thewatch list, and currently lower oil pricing.We present our best USD High Yield ideas, including: 1) 29 Overweights/longs; 2)9 Underweights/shorts; 3) two swaps; 4) six term loan trade ideas; and 5) one CDS idea. Whileour list is shorter than it has been in a few quarters, this reflects the need for a very high bar forconviction given the market backdrop.In the strategy section below, the team suggests playing defense, including shifting weights tosecured Bs from CCCs and unsecured Bs. We also suggest considering corporate hybrids or BDCsas a an alternative to (tight) trading BBs. Finally, we continue to prefer loans over bonds.The recommendations from our prior Best Ideas report (September 2025) produced totalreturns of 40bp between September 17 and January 9, while the the High Yield marketproduced total returns of 179bp. Our basket of short recommendations produced total returnsof 258bp over the same period (Figure 17).FICC ResearchCredit Research14 January 2026SIGNATURECorry Short+1 212 526 6253corry.short@barclays.comBCI, USHale Holden+1 212 412 1524hale.holden@barclays.comBCI, USPaul Chambers+1 713 236 2455paul.d.chambers@barclays.comBCI, USShanna Qiu, CFA+ 1 212 526 9232shanna.qiu@barclays.comBCI, USScott Grabine+ 1 212 526 1429scott.grabine@barclays.comBCI, USEdward Brucker, CFA+1 212 526 4435edward.brucker@barclays.comBCI, USJeff Harlib+1 212 412 6952jeffrey.harlib@barclays.comBCI, USDavid Hargreaves+1 212 526 6136david.hargreaves@barclays.comBCI, USChristophe Boulanger+44 (0) 20 3555 1984christophe.boulanger@barclays.comBarclays, UKComp