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This is very common and is done intentionally to exaggerate any distortion over 100% modulation to the point where it's not usable at that level. Running that IF signal through the crystal filter prevents splash but makes heavy audio sound like SSB as a result of the circuit used. You may be interested in knowing I've had success when using the standard Cobra 148GTL series pass modulator on the FET driver stages of the FT-857 in AM. Full broadcast fidelity is achieved with positive peaks, as strong at the largest SSB peaks. Unfortunately Yaesu was incapable of manufacturing a quality LCD display for this rig that could handle temperature changes in the car and like many other 857's the typical defective display, has made the radio almost unusable!


 These were some of the last HF rigs able to still provide maximum AM performance right out of the box. Depending on where the AM carrier oscillator is located in the IF stage, it can be an ideal place to inject modulation.


It's almost sad to see how many HF rigs were manufactured with horrible AM audio while still having just about all of the needed parts to produce awesome AM audio. Simply changing the point where the AF is mixed with RF, solves most of the AM problems in these rigs, with the only added parts being the ones used to switch the AF away from the balanced modulator in AM and to a later stage within the rig.