Global Credit Trader: Rates in the Driver's Seat

Higher global rates are acting as a significant headwind to full-year 2026 corporate credit returns, particularly in USD investment grade. However, strong technicals and emerging AI-related supply are supporting valuations, with Goldman maintaining a preference for USD credit over EUR.

Key Takeaways

• 1.Rising rates are the primary headwind for credit returns in 2026, with a hypothetical scenario of current rates implying returns as low as 1.3% for USD IG.
• 2.While May supply has been underwhelming, structural drivers like strategic M&A and AI-related financing are expected to keep issuance active regardless of seasonal patterns.
• 3.Technicals remain supportive for USD IG cash spreads, which are currently rich versus synthetic counterparts due to benign duration-adjusted supply.

Table of Contents

• Outlining a hypothetical scenario for (lower) full-year total returns
• May supply: More muted than expected (at least so far)
• A range of market implications
• Looking ahead: Seasonal patterns may be less relevant for AI and M&A related deals
• Forecast dashboard: Spreads, returns, issuance, defaults, and ratings migrations
• Forecast dashboard: Relative value views
• Performance dashboard: Cash and synthetic markets
• Performance dashboard: Sectors
• Performance dashboard: USD Credit ETFs
• Performance dashboard: Bond-level dispersion
• Relative value dashboard: Excess spreads in the USD and EUR markets
• Performance dashboard: Biggest movers in the USD bond market
• Valuation dashboard: Percentile ranks for spreads and yields
• Valuation dashboard: Sizing the carry in USD and EUR fixed income markets
• Valuation dashboard: Macro index volatility
• Valuation dashboard: CLOs
• USD IG and HY Sentiment indicators
• Microstructure dashboard: Top 20 most traded capital structures in the USD IG and HY markets
• Microstructure dashboard: Liquidity conditions in the USD secondary bond market
• Flow dashboard: Mutual fund and ETF AUM
• Flow dashboard: Mutual fund and ETF flows
• Flow dashboard: Upcoming coupon and principal payments
• Flow dashboard: Positioning in macro indices
• Flow dashboard: ECB QT
• Foreign demand and hedging cost
• Primary market dashboard: USD gross issuance
• Primary market dashboard: EUR gross issuance
• Primary market dashboard: Use of proceeds
• Primary market dashboard: Net issuance
• M&A volume
• Primary market dashboard: CLO creation and refinancing
• Primary market dashboard: Maturity walls
• Default and ratings migration dashboard: Default trends
• Default and ratings migration dashboard: Upgrades and downgrades
• Disclosure Appendix

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