Corporate Credit Snapshot - October 2026

October 8, 2026

Please click here to download the full report.

US

September offered fixed income investors little room to hide, and US credit delivered negative returns as both short- and long-term rates moved higher. Renewed escalation in the Middle East, rising energy prices, strong economic data, and a rate hike from the Federal Reserve (Fed) all supported the case for higher rates, as markets came to view central banks as embarking on a full hiking cycle rather than merely fine-tuning policy. Fundamentals remain robust, with solid growth driven by business investment and consumer spending, strong earnings from financial and cyclical sectors outside of energy, and manufacturing data pointing to a broad-based expansion. However, this growth picture, combined with cost-push pressure from the conflict, has kept inflation elevated and the market pricing in further hikes. Treasury yields rose to multi-year highs, and credit spreads, which had been largely resilient for much of the month, widened across the board into month-end. Technicals were also soft, as an unusually heavy new issue calendar coincided with outflows from fixed income amid a more restrictive Fed.

EUROPE

European credit delivered negative returns as both short- and long-term rates moved higher. Renewed escalation in the Middle East, resurgent energy prices, strong economic data on both sides of the Atlantic, and rate hikes from the European Central Bank (ECB) and the Federal Reserve (Fed) all supported the case for higher rates, as markets came to view central banks as embarking on a full hiking cycle rather than merely fine-tuning policy. Against this backdrop, losses were broad-based across both long- and short-duration credit as yields reset higher. Spreads were largely resilient across investment grade and high yield for much of the month, before accelerating wider into month-end. The widening partly reflected rising political uncertainty in France ahead of the 2027 presidential election. Despite solid current data, the medium-term European growth outlook remains somewhat uncertain, with gas prices and the region's energy vulnerabilities continuing to weigh on sentiment.

EM

Emerging markets (EM) debt delivered negative returns as markets came to view central banks as embarking on a full hiking cycle rather than merely fine-tuning policy. Higher rates threaten to deepen fiscal strain, while the AI boom has emerged as an unexpected competitor with sovereigns for capital. Corporate credit outperformed sovereigns, given the sovereign index's longer duration and sharper spread widening. Across ratings, high yield suffered from more aggressive spread widening and investment grade from rising government yields, leaving both with comparable drawdowns, while short-duration strategies proved the most resilient given their limited rate sensitivity. Regionally, Asian credit preserved capital best across both investment grade and high yield, supported by negative net supply, while Latin America declined due to  its longer duration profile as US Treasury yields rose. Commodity-linked sectors such as energy and basic materials outperformed, while homebuilders and transportation lagged amid higher rates and energy prices. Technicals were broadly supportive, with issuance well below the historical average for September.

OUTLOOK

We are heading into October with event risk still elevated, as the Middle East conflict remains unresolved and higher energy prices (notably diesel) continue to reinforce a 'higher for longer' inflation narrative across major economies. We expect rate volatility to persist: further hikes from the Fed and the ECB appear largely priced in, but governments in the US and across Europe may find it challenging to rein in spending enough to put their budgets on a firmer footing. We remain constructive on corporate fundamentals globally, and we believe the US third-quarter earnings season should help refocus markets on underlying credit quality. While spreads widened into the end of September, we view this repricing—alongside elevated all-in yields—as one that may create more attractive entry points than those available after August's rally. 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 October 2026 and may change without notice.

--------

Important Information

Muzinich and/or Muzinich & Co. referenced herein is defined as Muzinich & Co., Inc. and its affiliates. Muzinich views and opinions. This material has been produced for information purposes only and as such the views contained herein are not to be taken as investment advice. Opinions are as of date of publication and are subject to change without reference or notification to you. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. The value of investments and the income from them may fall as well as rise and is not guaranteed and investors may not get back the full amount invested. Rates of exchange may cause the value of investments to rise or fall. Emerging Markets may be more risky than more developed markets for a variety of reasons, including but not limited to, increased political, social and economic instability; heightened pricing volatility and reduced market liquidity.

Any research in this document has been obtained and may have been acted on by Muzinich for its own purpose. The results of such research are being made available for information purposes and no assurances are made as to their accuracy. Opinions and statements of financial market trends that are based on market conditions constitute our judgment and this judgment may prove to be wrong. The views and opinions expressed should not be construed as an offer to buy or sell or invitation to engage in any investment activity, they are for information purposes only.

This discussion material contains forward-looking statements, which give current expectations of a fund’s future activities and future performance. Any or all forward-looking statements in this material may turn out to be incorrect. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Although the assumptions underlying the forward-looking statements contained herein are believed to be reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurances that the forward-looking statements included in this discussion material will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation that the objectives and plans discussed herein will be achieved. Further, no person undertakes any obligation to revise such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

United States: This material is for Institutional Investor use only – not for retail distribution. Muzinich & Co., Inc. is a registered investment adviser with the Securities and Exchange Commission (SEC). Muzinich & Co., Inc.’s being a Registered Investment Adviser with the SEC in no way shall imply a certain level of skill or training or any authorization or approval by the SEC.

Issued in the European Union by Muzinich & Co. (Ireland) Limited, which is authorized and regulated by the Central Bank of Ireland. Registered in Ireland, Company Registration No. 307511. Registered address: 32 Molesworth Street, Dublin 2, D02 Y512, Ireland. Issued in Switzerland by Muzinich & Co. (Switzerland) AG. Registered in Switzerland No. CHE-389.422.108. Registered address: Tödistrasse 5, 8002 Zurich, Switzerland. Issued in Singapore and Hong Kong by Muzinich & Co. (Singapore) Pte. Limited, which is licensed and regulated by the Monetary Authority of Singapore. Registered in Singapore No. 201624477K. Registered address: 6 Battery Road, #26-05, Singapore, 049909. Issued in all other jurisdictions (excluding the U.S.) by Muzinich & Co. Limited. which is authorized and regulated by the Financial Conduct Authority. Registered in England and Wales No. 3852444. Registered address: 8 Hanover Street, London W1S 1YQ, United Kingdom.