Global Credit: What We‘re Watching

Research evidence excerpt

Global Credit: What We‘re Watching

July 27, 2026 02:41 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

What moved the markets last week? Brent crude breached $100/bbl on renewed escalation in the US–Iran conflict last week, reigniting inflation conerns

and lifting the 10-year UST yield to its highest level since January 2025. AI capex concerns also weighed on tech, with Alphabet’s announcement of $811bn MorganVishwasStanleyPatkar & Co. LLC

in future spending commitments triggering a broader selloff. This week, Amazon, Meta and Microsoft report earnings, while our US rates strategists expect Strategist

the Fed to remain on hold at Wednesday’s FOMC meeting. Vishwas.Patkar@morganstanley.com

+1 212 761 8041

Key Recommendations: Record AI-driven corporate bond issuance and stronger-than-expected bank issuance are expected to push US IG spreads

modestly wider despite resilient demand and inflows. We recommend selling the 6M iBoxx IG TRS and hedging duration with government bonds, as Morgan Stanley & Co. International plc+

positioning remains crowded and valuations have become less attractive. We think EUR IG should remain relatively resilient due to a more balanced Aron Becker

demand-supply backdrop, and we see a relative-value opportunity to switch from wide-trading EUR bonds into USD. We prefer asset-level data center risk Strategist

over unsecured corporate risk in the US within the AI ecosystem. Aron.Becker@morganstanley.com

+44 0(207) 677 0754

US Credit: US credit markets softened last week, with IG spreads widening 2bp to near three-month wides as concerns around the tech sector and the Ellie Dann

Middle East conflict weighed on sentiment.