Anyone who has travelled on the London Underground will be familiar with the refrain “Mind the gap.” Curved platforms and straight rolling stock create an obvious hazard. High yield investors increasingly have a few gaps of their own to worry about.

At the headline level, the high yield market has been remarkably well behaved in 2026, notwithstanding some pressure through October. Spreads remain relatively tight, yields are attractive and, at first glance, there is little to suggest anything particularly unusual is happening. Look beneath the surface, however, and the picture becomes much more interesting. The relationship between BBB and BB-rated credit remains relatively normal compared with the experience of the past five years. But as you move down the ratings spectrum, things start to look very different. The gap between BBs and Bs has widened, while the divergence between stronger high yield credits and the weakest parts of the market has become more pronounced still. Increasingly, when the market decides a credit has a problem, it isn’t repricing it by 50 or 100 basis points. Bonds can rapidly move from the 90s into the 70s, 60s or below. The gap between performing and stressed credit is becoming a chasm.





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