Corporate Credit Highlights

• JP Morgan Strategy on the coupon differential in IG new issues vs. maturing:  “The coupon differential of new issues versus maturing bonds was wide at 196bps in May, the highest since February 2025.” ¹‍
• Bank of America, Merrill Lynch (BAML) IG Strategy on Hyperscaler supply:   “We estimate the current hyperscaler debt eligible for the global IG index is $450bn, which includes the USD META deal in late April (which will enter the index in June), and the EUR, CAD, CHF and JPY new issue deals in May. The $450n remains below other concentrated large sectors as of April 30th: $1,021bn for the big six US banks (BAC, C, JPM, GS, MS, WFT), $573bn for the top six non-US banks (HSBC, BNP, UBS, ACAFP, BACR, BPCEGP), and $475bn for the large-cap Telecom issuers (T, VZ, TMUS, CMCSA, CHTR).  The relative hyperscaler index size should remain in a similar range in 2027. Assuming hyperscaler supply is mostly done for 2026 (in line with our forecast) and another $175bn in supply for 2027 (higher than our $100bn forecast), but more in line with investor expectations, shows the sector size stays close to large cap Telecom and the top non-US banks, growing to about $600bn in terms of the global IG index notional.  Currently, the largest hyperscaler - ORCL - is the 10th largest issuer in the global IG corporate bond index, just below VZ and WFC. Three other hyperscalers rank among the top 20 (AMZN, GOOGL, and META), while MSFT is 87th with $37bn in bonds. The relative size of the hyperscalers should continue to grow in 2027. Our technology, media, and telecommunications (TMT) analyst Tom Curcuruto' forecast for 2027 implies AMZN could become the 5th largest issuer, assuming index notional for the rest remains at the current levels.” ²
• Wells Fargo Strategy on IG Sector Dispersion:  “Since 2017, IG spreads have maintained an average annual trading range of 47 bps, with 2021 the tightest year at 21 bps and 2022 the widest at 74 bps. We exclude 2020 given the pandemic-driven 280 bps annual range, which would skew the average. Notably, the annual trading range has modestly widened since 2022: the IG spread range averages 49 bps in 2022–26 versus 46 bps in 2017–21 (ex-2020).” ³

• Deutsche Bank Strategy report on software loans:  Only 5.8% of private credit software loans were valued at a price less than $80 at the end of Q1, compared to 25.6% of US Leveraged Loan software loans today that are now trading below $80. ⁴

• Goldman Sachs Strategy on BBs:  “In the USD market, spreads of BB-rated bonds have notably outperformed B-rated bonds since late 2025.  The OAS ratio between the two rating cohorts is hovering near the widest level of the post-financial crisis era.  We believe the resilience of BBs reflects, in part, a ‘flight to quality’ positioning within the USD HY market. We attribute this sentiment to the overhang of geopolitical and macroeconomic uncertainty—even as the directional tone has felt ‘risk on’ at the index level. The relative underperformance of B-rated spreads is also consistent with the ‘atypical beta’ behavior we highlighted in late April. Notably, however, the ‘flight to quality’ hasn’t translated into the relative value trade off between the low end of IG (BBBs) and the high end of HY (BBs).  The ratio of BB spreads vs. BBBs ranks towards the middle-to-lower end of the historical distribution—signaling that the higher rated BBB cohort has not outperformed BBs. While historical valuations imply some modest scope for compression in BB spreads relative to BBBs, we believe the more likely outcome is for the ratio to remain range bound around current levels, amid a more challenging growth and inflation mix.” ⁵‍

Definitions
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• Assets under management (AUM) is the total market value of the investments managed by a person or entity on behalf of investors.
• Bank loans (also known as floating-rate loans or leveraged loans) invest in bonds and other fixed-income securities that have variable, as opposed to fixed, interest rates.
• A basis point (bp) is one hundredth of a percent, so 100 basis points is equivalent to 1%.
• Beta measures an asset's price volatility relative to the broader market. It is a gauge of systematic risk—the unpredictable market forces that
• The Bloomberg Global Aggregate Bond Index (global IG index) is a flagship fixed-income benchmark that measures global investment-grade debt from developed and emerging markets.
• A bond isa fixed-income instrument and investment product where individuals lend money to a government or company at a certain interest rate for an amount of time. The entity repays individuals with interest in addition to the original face value of the bond.
• Broadly syndicated loans (BSL) are a type of loan that will typically be arranged by an investment bank and then syndicated to a large group of commercial banks and specialist loan investors.
• Capital expenditure is the money spent on acquiring or maintaining fixed assets, such as land, buildings, and equipment.
• Collateralized loan obligation (CLO) is a structured financial product that bundles a pool of lower-rated corporate loans and sells them to investors in tranches with different risk/return profiles.
• A corporate bond isa debt security that is issued by a company to raise capital.
• A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity.
• The credit market refers to the marketplace through which companies and governments issue debt to investors in exchange for regular interest payments. ‍
• Credit rating is when bond ratings are grades given to bonds that indicate their credit quality as determined by private independent rating services such as Standard &Poor's, Moody's and Fitch. These firms evaluate a bond issuer's financial strength, or its ability to pay a bond's principal and interest in a timely fashion. Ratings are expressed as letters ranging from `AAA', which is the highest grade, to `D', which is the lowest grade.
• Credit spread is the difference in yield between two debt securities with the same maturity but different credit quality.
• Derivative is a type of financial contract whose value is dependent on an underlying asset, a group of assets, or a benchmark. It's an agreement set between two or more parties that can be traded on an exchange or over the counter.
• ‍Duration is often used to measure a bond’s or fund’s sensitivity to interest rates. The longer a fund’s duration, the more sensitive it is to interest-rate risk. The shorter a fund’s duration, the less sensitive it is to interest-rate risk.
• Distressed Exchange is a negotiation process between a financially troubled company and its creditors where the company seeks to restructure its debt without filing for bankruptcy.
• EBITDA (earnings before interest, taxes, depreciation, and amortization) is a standard of measurement banks use to judge a business’ performance.
• A Fallen Angel is a bond that was initially given an investment-grade rating but has since been reduced to a junk bond status.
• ‍High-yield bonds (or junk bonds) are bonds that pay higher interest rates because they have lower credit ratings than investment-grade bonds.
• The Hyperscalers Index refers to a financial benchmark that measures the equity or corporate debt performance of major cloud data center and Artificial Intelligence (AI) providers.
• The ICE BofA US Corporate Index isa benchmark index that tracks the performance of investment grade corporate debt in the United States.
• Investment grade refers to the quality of a company's credit. To be considered an investment grade issue, the company must be rated at 'BBB' or higher by Standard and Poor's or Moody’s.
• Investment Grade (IG) Index refers to the ICE BofA US Corporate Index.
• An issue or issuance is a process of offering securities in order to raise funds from investors. Companies may issue bonds or stocks to investors as a method of financing the business.
• Implied default rate is a measure of the market's perception of the likelihood that a borrower will default on their debt obligations.
• ‍Leverage refers to using debt (borrowed funds) to amplify returns from an investment. A leveraged loan is a type of loan made to borrowers who already have high levels of debt and/or a low credit rating. Lenders consider leveraged loans to have an above-average risk that the borrower will be unable to pay back the loan (also known as the risk of default).
• ‍Leveraged Buyout is the acquisition of a company primarily using borrowed funds, often secured by the assets and cash flows of the acquired company.
• Liquidity refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price.
• Maturity (or maturity wall) is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist.
• Mergers and Acquisitions (M&A) are business transactions in which the ownership of a company, business organization, or one of their operating units is transferred to or consolidated with another entity. They may happen through direct absorption, a merger, a tender offer or a hostile takeover.
• Morningstar LSTA US Leveraged Loan Index is a market-value weighted index designed to measure the performance of the US leveraged loan market.
• Mortgage-backed securities (MBS) are investment products backed by a pool of mortgage loans.
• Net debt / EBITDA ratio is a type of leverage ratio used to determine if a borrower generates sufficient operating cash flows to meet its mandatory interest obligations and pay down its outstanding debt balance in full at maturity.
• ‍Option adjusted spread (OAS) is the measurement of the spread of a fixed-income security rate and the risk-free rate of return.
• Par-weighted refers to a method of calculating averages where the individual values are weighted by their par (face) value. This means that larger holdings or transactions have a greater influence on the final average.
• Post-GFC refers to the period following the Global Financial Crisis (GFC), which began in 2007-2008. This period is characterized by economic recovery, changes in financial regulation, and evolving global financial systems.
• A refinance (ReFies) refers to the process of revising and replacing the terms of an existing credit agreement, usually as it relates to a loan or mortgage.
• ‍Spread is the measurement of the spread of a fixed-income security rate and the risk-free rate of return, represented by Treasury bonds. Spread income refers to the additional income from this difference.
• The 10-year treasury bond yield is the interest rate the U.S. government pays to borrow money for a decade, serving as a benchmark for other interest rates and a key indicator of investor sentiment about economic conditions.
• Total Return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period.‍
• Weighted Average Coupon is the average gross interest rate of the underlying mortgages in a mortgage-backed security at the time it was issued.
• Weighted-Average Rating Factor (WARF) is a numerical representation of the credit risk of a portfolio calculated by Moody’s.
• ‍Yield isa measure of the profit that an investor will be paid for investing in a stock or a bond. It is usually computed on an annual basis.
• Yield to worst (YTW) estimates the lowest possible return on a bond without the issuer defaulting.