2025 remains a favourable year for credit markets for many reasons. Firstly, the global picture is positive and supported by a combination of resilient economic activity, inflation convergence to target, and less restrictive monetary policy in both the United States and the Eurozone. Our main concerns relate to possible upside risks to US inflation data, notably with tariffs, and downside risks to Eurozone growth. 

Secondly, corporate fundamentals remain solid, as companies have taken advantage of the post-pandemic period of ultra-low interest rates and the economic recovery to improve their credit profiles. Companies have made good progress in extending maturities, easing near-term liquidity pressure on many low-rated borrowers. Resilient economic activity means credit quality should remain solid, especially in high yield (HY). We expect default rates around 3% in the US, close to their long-term average. The market is wide open, even for low-rated names, which can easily access the market to refinance. In the United States, higher rates for longer could be a challenge for the weakest credit quality cohorts, such as CCCs. In the Eurozone, the risk is more towards a more pronounced-than-expected slowdown in economic activity. Finally, private debt financing is also supportive of companies in sectors such as healthcare.

You can now read the full whitepaper at the link below