Global Credit: What We‘re Watching

Research evidence excerpt

Global Credit: What We‘re Watching

June 29, 2026 05:24 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 Trades: This week, we outline our key trade recommendations across credit derivatives. Credit vol versus equities is back near record lows, re-establishing Morgan Stanley & Co. LLC

credit as a cheap hedge. In the US, we like CDX IG 1x1 payer spreads as cheap hedges and 1x2 payers as attractive bearish range trades. We recommend Vishwas Patkar

buying CDS on AI-exposed names and expect the cash-CDS basis to decompress. In Europe, we recommend Main payer spreads and 3s5s flatteners as Strategist

protection against near-term credit widening. Vishwas.Patkar@morganstanley.com

+1 212 761 8041

US Investment Grade: Concerns around AI capex and valuations weighed on credit, as US IG widened 2bp last week, translating into an excess returns of -

0.2%. Lower rated and longer dated name led the widening, steepening the spread curve. Tech, media and telecom delivered the weakest excess returns, while Morgan Stanley & Co. International plc+

banks, autos and real estate performed better. US IG funds saw $4.1bn of net inflows last week, lifting YTD inflows to +$83.5bn. Primary market activity was Aron Becker

strong again, with $53bn of bonds pricing last week, the second $50bn+ week in a row. YTD supply is tracking at $1,267bn (+28% YoY). Strategist

Aron.Becker@morganstanley.com

US Leveraged Credit: HY spreads widened by 16bp, resulting in negative excess return of -0.4% for the week. Loan spreads widened by 6bp and delivered +44 0(207) 677 0754

negative total returns for the week (-0.1%). In HY single Bs widened the most, followed by BBs. In loans, single Bs and BBs widened while CCCs saw tightening. Ellie Dann