Global Credit View

HSBC warns that despite robust credit fundamentals, current tight spreads are dangerously reliant on the AI cycle and US growth. They recommend diversifying into EUR credit and US Utilities while keeping maturities inside 10 years to guard against potential tail risks.

Key Takeaways

• 1.Credit spreads are at multi-decade tights, but current market optimism rests on 'narrow foundations' heavily reliant on the AI cycle and US growth.
• 2.EUR credit is preferred over US credit because it is less exposed to AI-related overbuilding risks and is supported by a robust domestic savings bid.
• 3.Investors should play the AI theme through the US Utilities sector rather than Technology, due to better safeguards against debt-funded capex risks.

Table of Contents

• Convictions
• Global Direction
• US credit
• EUR credit
• GBP credit
• Asia credit
• Chartpack
• Month in review
• Key forecasts
• Performance update
• Global credit risk-reward
• Supply, demand, and positioning
• Fundamentals

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