Certain areas of leveraged credit are overvalued, particularly CCC-rated bonds and bank loans, but often some of the best profits come in the final phase of a cycle. With valuations frothy, we believe now is the time to start moving up in credit quality. Our analysis finds value in BB-rated and B-rated bonds and we are most positive on BB-rated and B-rated bank loans, where discount margins still trade wide of ex-recession averages.