Corporate Credit Snapshot - September 2026
Snapshot
September 9, 2026
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US
US credit delivered positive returns in August across the board. The month was somewhat choppy, shaped by the conflict in the Middle East, thin summer liquidity, and an ongoing earnings season. Strong corporate earnings supported a tightening in credit spreads across the credit spectrum, with high yield delivering the strongest returns, buoyed by robust earnings and a light new issue calendar. At the same time, communication from the Federal Reserve suggested the policy tightening cycle may not yet be complete, with investors cautioned against underestimating the potential for a renewed acceleration in inflation and, consequently, a push forward in policy tightening. Interest rates moved higher over the month as the curve shifted upward, a dynamic that weighed more heavily on longer-duration assets and contributed to high yield's outperformance relative to investment grade. Within fixed income, corporate credit outperformed government bonds, a trend we expect to continue. Against this backdrop, we see opportunity across the credit spectrum: shorter-duration positioning remains attractive given the current rate environment, while investment grade offers investors durable, high-quality income.
EUROPE
European credit markets delivered mixed but broadly constructive returns in August. The month was somewhat choppy, shaped by the conflict in the Middle East, thin summer liquidity, and an ongoing earnings season. Strong global corporate earnings supported a tightening in credit spreads, most notably in high yield, which outperformed investment grade on the back of robust results, growth upgrades, and a light new issue calendar—a combination that pushed spreads tighter. Demand for credit remained healthy and new supply was absorbed easily. At the same time, central bank communication suggested the tightening cycle may not yet be complete. Investors appear increasingly confident that the European Central Bank will raise rates by 25 basis points in September, with two further hikes anticipated over the next 12 months, as a resilient economy, sticky inflation, and rising gas prices heading into winter leave little room for a pause. Within fixed income, corporate credit outperformed government bonds, a trend we expect to continue. In Europe, the long end of the curve underperformed on fiscal tolerance concerns. Against this backdrop, higher yields at the short end of the curve may allow for income generation without exposure to concerns about long-term fiscal stability.
EM
Emerging markets (EM) gained this month. August was somewhat choppy, shaped by the conflict in the Middle East, thin summer liquidity, and the ongoing earnings season. Strong global corporate earnings supported a tightening in credit spreads, most notably in high yield. At the same time, communication from major central banks suggested that the policy tightening cycle may not yet be complete, with investors cautioned against underestimating the potential for a renewed acceleration in inflation and, consequently, a push forward in policy tightening. Total returns from government bonds and corporates were differentiated primarily due to the outperformance of high yield, which outperformed due to spread tightening, combined with higher carry and lower sensitivity to rising global government bond yields. Within high yield, Asia was the strongest-performing region, driven primarily by the property sector. In investment grade, Eastern Europe and Middle East/Africa benefited from broad-based spread tightening across the Middle East, which helped offset the impact of rising government bond yields. From a credit-rating perspective, BBs were the strongest-performing bucket in EM, benefiting from an attractive balance between credit risk and lower interest-rate sensitivity.
OUTLOOK
We are heading into September in an environment of persistent event risk, with the Middle Eastern conflict still unresolved and inflation showing few signs of easing across major economies. We expect US Treasury yield volatility to remain elevated around the Federal Reserve's September meeting, where markets are pricing a meaningful probability of a further rate hike. In Europe, the European Central Bank is widely anticipated to hike as well. In general, we remain positive on corporate fundamentals globally, although we acknowledge the market's questions around near-term returns, particularly in tech-related sectors tied to heavy capital spending. We also acknowledge that credit spreads look quite compressed following August's rally; however, we expect a heavier new issue calendar in September to create attractive entry points. We continue to find healthy yields offering potential income and downside defense, and we remain active in seeking out opportunities as they arise.
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 August 2026 and may change without notice.
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