Corporate Credit Snapshot - April 2026

April 9, 2026

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US

US credit delivered negative returns in March, reflecting a period of spread widening on the back of the conflict in the Middle East and related concerns around oil prices. Interest rates also moved higher as the market priced out rate cuts from the Federal Reserve in 2026. This repricing came in response to fears of higher inflation driven by higher energy prices. However, despite the potential impact of higher energy prices and the closure of the Strait of Hormuz, the spread move felt relatively contained. In the US, real yields (indicating growth expectations) have moved higher, suggesting that markets are not pricing in a meaningful deterioration in growth, but rather the opposite. This may help explain the limited widening in credit spreads, which are typically more sensitive to growth expectations, while also reinforcing the idea that the conflict in Iran may be short lived.

EUROPE

As was the case in the US, European credit markets delivered negative returns in March.  Interest rates also moved higher as markets priced in rate hikes anticipated in Europe and no rate cuts in the US in 2026. This repricing came in response to fears of higher inflation driven by higher energy prices, and was fuelled by more hawkish central bank comments, particularly in Europe. However, despite the potential impact of higher energy prices and the closure of the Strait of Hormuz, the spread move felt relatively contained. Given the volatility throughout the month, primary markets were quieter than had been anticipated, particularly in high yield. Credit generally saw outflows as investors reacted to the weaker sentiment, although shorter-dated credit remained in demand as short-term yields saw some of the largest moves higher.

EM

Emerging markets (EM) debt delivered negative returns in March. While corporate credit market spreads have widened, the moves have been relatively contained compared to previous episodes of event-driven stress. Energy-importing nations were among the most acutely affected, facing sharply higher import costs at a time when many had only recently achieved a degree of macroeconomic stability following several years of reform and balance sheet repair. Asian economies were particularly exposed given their structural dependence on Gulf energy flows, with disruption to key shipping corridors adding to supply concerns and currency pressures. A stronger US dollar compounded the challenge for many EM central banks, limiting their room to ease policy in response to slowing growth. Issuance activity slowed sharply as primary markets effectively closed for much of the month, with issuers unwilling to test investor appetite amid the uncertainty. Credits in Eastern Europe and Latin America held up somewhat better in relative terms, benefiting from greater distance from the immediate shock.

OUTLOOK

It seems that the conflict in Iran is being treated as a mostly controlled, inflationary geopolitical shock, rather than the start of a broader economic downturn. Implicitly, markets appear to be pricing a scenario in which the conflict is resolved within a limited timeframe. In our view, the conflict is likely to de-escalate, and the market has turned overly hawkish on central bank policy expectations. At the same time, we continue to closely follow private credit liquidity developments, noting that while private credit continues to experience close scrutiny, we do not see the asset class as carrying systemic risk. Regarding the broad theme of AI disruption, we continue to view the buildout of AI as an important growth driver—particularly in the US—bolstering our overall confidence in a resilient growth picture, despite the headwinds of higher energy prices.

 

Past performance is not a reliable indicator of current or future performance. 

Muzinich views and opinions are for illustrative purposes only and not to be construed as investment advice.

This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed by Muzinich & Co. are as of March 2026 and may change without notice.

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