Corporate Credit Highlights

• BAML IG Strategy updated AI supply forecast:  “With 1Q earnings out for all five hyperscalers, our TMT analyst Tom Curcuruto has updated his hyperscaler supply forecast. We continue to call for $175bn for year 2026, with $135bn already done across currencies. That leaves a manageable $40bn for the remainder of the year.” ¹‍
• Bank of America Strategy on IG supply:  “IG supply volumes have been heavy so far in 2026. We do not think that translates into significant upside risks for our $1.84tr annual supply forecast. Instead, we think issuance has been frontloaded this year by hyperscalers and potentially by banks as well. Away from these two sectors and the supply to fund M&A, issuance is down slightly so far in 2026 compared to over the same period last year. Frontloading of supply implies less to come in the second half of 2026, supporting the already strong IG market technicals.” ²‍
• Goldman Sachs IG sales comments on AI supply impact in IG market:  “Of the 660 issuers to issue IG bonds over the past 1yr, just 11 account for ~25% of the duration adjusted issuance, with the AI CAPEX names (4 hyperscalers + the 4 IG data center deals) accounting for 20% alone.”  ‘Hyperscaler earnings this week showed that we are still potentially in the early stages of this story. While CAPEX estimates went up only marginally, lease commitments continued to accelerate, likely suggesting further data center funding on the horizon. Compute commitments also exploded QoQ driving the desire to continue to access debt markets for financing.” ³

• Deutsche Bank Strategy Default Monitor:  “The $Lev Loan default rate increased a more marginal 0.1pps to 5.4%, which is the second lowest reading since September 2023 (only February was lower), having fallen from 7.7% since November 2024. The percentage of defaults that are distressed exchanges fell further to just 59% after being nearly 72% at this time last year. This is likely a function of lower LME activity as the prospect of near-term rate cuts fades and some firms are defaulting for the second time.” ⁴

• Deutsche Bank Research on rising stars and fallen angels:  “Just over one quarter into the year, Rising Stars are just edging out Fallen Angels to start 2026 with a notional value of $19.9bn upgraded to $IG versus $16.2bn downgraded to $HY. If this trend were to continue, it would represent a return to net Rising Stars after 2025 saw just over $20bn of net Fallen Angel debt last year. As is typical in large Fallen Angel years, the debt was concentrated in a few large capital structures.” ⁵‍
• JP Morgan Strategy on HY duration:  “A combination of shorter-duration issuance, rising coupons, and patience by HY issuers toward refinancing low coupon debt have contributed to a decline in the HY indexes’ duration. Specifically, the modified duration for the HY Index is 3.11 or less than half the High-Grade index’s duration of 6.83. For context, the record low was 2.93 in January 2026 and the long-term average stands at 4.05.  By rating, the BB, B and CCC buckets have a duration of 3.34yrs, 2.84yrs and 2.81yrs, respectively, which is well below the long-term averages of 4.59yrs, 3.76yrs, and 3.50yrs.  What is driving the decline in duration? Partly responsible, the average maturity at issuance has fallen considerably following the Fed’s rate hike campaign.  Averaging 7.69yrs since 2000, the average maturity for 2023, 2024, 2025, 2026’s HY issuance has been 6.2yrs (record low), 6.5yrs, 6.5yrs, and 6.7yrs respectively. Meanwhile, HY companies are being patient toward refinancing low coupon debt. Consequently, the average maturity for the HY index is a record low 4.8yrs versus a long-term average of 6.7yrs.  Meanwhile, the average coupon is at a 9yr high. Rising 97bp since February 2022, the average coupon (6.70%) is still comfortably below the 8-10% coupons which prevailed pre-GFC.” ⁶

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 is one hundredth of a percent, so 100 basis points is equivalent to 1%.
• 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 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.