WDI - High Yield Bonds In View: The Impact Of Inflation

• What sets the current environment apart is the broad-based nature of input-cost inflation, spanning raw materials, logistics/transportation, and labor, as well as shortages of intermediate goods such as semiconductors.
• Companies are leaning heavily on pricing, in addition to productivity and cost savings measures, to blunt the impact to margins.
• We believe that US high yield corporate bonds overall are likely to face only modest downside from prospective impacts of input-cost inflation and shortages on credit fundamentals, although we believe there are advantages that can be gained from careful industry weighting and credit selection.

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