HilltopSecurities is excited to present the findings of its fifth Annual High Yield Survey. This report offers valuable insights into interest rates, distress triggers, emerging trends, AI, green bonds, and potential opportunities within the municipal high-yield market. While some questions have been updated to reflect shifts in the sector, one thing remains clear: investors have strong opinions.

10 Key Takeaways from the 2025 Hilltop High Yield Survey

• Rate Outlook: 62% expect AAA 30-year Muni rates to stay flat; 32% predict a decline of 50 bps or more.
• No Consensus on Credit Spreads: 50% foresee widening by ~25 bps; 37% unchanged; 14% narrowing.
• Uneven AI Adoption: 67% still exploring; only 16.8% report some workload reduction; comments highlight benefits and risks.
• Sector Projection for Greatest Defaults: Project Finance and Private Rail top the list, followed by Higher Education and Skilled Nursing.
• Most Favorable Sectors: Senior Living and Hospitals followed by the land-secured sector.
• Credit Priorities for High Yield Investment: Liquidity/Equity and Management quality remain the most critical factors, followed by projections and investment thesis.
• Appreciation of BB and BB- Rating Value: Growing openness to BB and BB- ratings; 39% value agency monitoring and upgrade potential; only 15.8% dismiss sub-IG ratings.
• Value of a Rating Solicitation Covenant: 62% now value solicitation covenants on non-rated deals; a reversal from 2024.
• Green Bond Designation: 96% say it’s “nice to have” but won’t pay extra; skepticism persists due to greenwashing concerns.
• High Yield Investment Deal Breakers: Recovery potential, secondary-market liquidity, and underwriter reputation, are the three top reasons to pass on new issues.

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