Corporate Credit Snapshot - January 2026

January 9, 2026

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US

US credit markets generated mixed returns in December. Given the holiday shortened month, we saw a seasonally quiet period with spreads mostly unchanged. The Federal Reserve cut policy rates for the third time in a row but signaled more caution around further rate cuts. Primary markets in both the US and Europe slowed down ahead of the Christmas holiday, although many market participants anticipate a heavy primary calendar in 2026, starting with a busy January. This is expected to be supported by increased AI-capex spending and a possible uptick in M&A activity. In general, spread premia in both the US and Europe continued to compress in December, with BBB rated credit outperforming single-As in investment grade, and higher beta markets—such as subordinated financials and high yield—outperforming.

EUROPE

European credit markets generated mixed returns in December. Given the holiday shortened month, we saw a seasonally quiet period with spreads mostly unchanged. The European Central Bank (ECB) remained on hold once again, while ECB Executive Board Member Isabel Schnabel made hawkish comments which helped to push longer rates higher.

EM

Emerging markets (EM) debt delivered positive returns in December. Given the holiday shortened month, we saw a seasonally quiet period with spreads mostly unchanged. Primary markets slowed down ahead of the Christmas holiday, although many market participants anticipate a heavy primary calendar in 2026, starting with a busy January. We believe the global macro environment is undergoing a meaningful reset following several years marked by major geopolitical volatility and tight monetary policy. We have seen some key sources of uncertainty easing—including tariff disputes—while the US and China are showing some early indications of re-engagement. At the same time, cooling inflation and softer energy prices are enabling central banks to move gradually toward more neutral monetary stances. In 2026, we believe EM could have a year defined by recalibration: steadier global growth, improving trade conditions, and a more balanced distribution of risks.

OUTLOOK

Looking ahead, we believe the global credit landscape remains fundamentally strong. Corporate earnings remain broadly solid, outside a few mostly idiosyncratic defaults, while supportive technicals effectively underpin historically tight spreads. As of year-end, we are broadly maintaining an overweight in higher yielding markets and seeking to take advantage of existing dispersion to enhance returns. On the investment grade side, we would look for more spread compensation to add risk. With stable or modestly lower short rates in Europe, we expect floating rate instruments to compete well with bonds, while barbell duration strategies could be more popular in USD credit.

 

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 January 2026 and may change without notice.

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