Global Credit: What We‘re Watching

Research evidence excerpt

Global Credit: What We‘re Watching

June 22, 2026 05:18 PM GMT

GLOBAL CREDIT STRATEGY

M O R G A N S T A N L E Y R E S E A R C HGlobal Credit: What We’re Watching Global

Key Trade Ideas: This week, we reiterate our key trade recommendations across credit derivatives that we outlined in our Mid-Year Outlooks. In the US, we Morgan Stanley & Co. LLC

expect the cash-CDS basis to decompress. We like buying CDS on AI-exposed names, while mezz tranches provide an effective way to capture compression Vishwas Patkar

(long HY 15-25% vs. IG 3-7 ). 1x1 payer spreads in CDX IG screen as relatively cheap hedges while 1x2 payers also offer a good entry point for a bearish range Strategist

trade. In Europe, we recommend payer spreads and 3s5s flatteners in Main as ways to protect against any near-term widening in credit. Vishwas.Patkar@morganstanley.com

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US Investment Grade: Last week, a further easing in geopolitical tensions was met by a more hawkish Fed meeting, ultimately leading to modestly wider

spreads / -0.1% in excess returns. The widening was led by higher rated and longer duration bonds. Tech, media and telecom delivered the weakest excess Morgan Stanley & Co. International plc+

returns, while banks, leisure and financial services performed better. US IG funds saw $5.4bn of net inflows last week, lifting YTD inflows to +$79.6bn. Primary Aron Becker

market activity was strong, with $47bn of bonds pricing last week. YTD supply is tracking at $1,177bn (+35% YoY). Strategist

Aron.Becker@morganstanley.com

US Leveraged Credit: HY spreads tightened by 1bp, resulting in excess return of 0.1% for the week. Loan spreads tightened by 2bp and delivered positive total +44 0(207) 677 0754

returns for the week (+0.2%).