European Credit Insights: Groundhog Summer – Mid-Year Themes

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European Credit Insights: Groundhog Summer – Mid-Year Themes

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27 Jul 2026 01:47:11 ET │ 15 pages

European Credit Insights

Groundhog Summer – Mid-Year Themes

CITI'S TAKE

Srikanth Sankaran AC

Heading into the summer lull, market focus is shifting from geopolitical and +44-20-7500-3689

rates volatility to the record issuance from US hyperscalers. We explore srikanth.sankaran@citi.com

these key themes and posit that a structural shift toward a sticky, yield-

focused investor base has made credit markets more resilient. We also

update our supply forecasts and year-end spread targets.

Rising Risks and Steady Credit Risk Premiums — Familiar macro risks, from

geopolitical tensions to rising bond yields, are re-emerging alongside a surge in AI-

driven supply. Despite this catalyst-laden backdrop, credit spreads have remained

remarkably resilient, anchored by a structural shift toward a sticky, yield-focused

investor base. Reflecting these technical considerations, we raise our non-financial

issuance forecast to €400 billion while marking down the magnitude of our

expected year-end spread widening.

IG Supply Reshaped by US Hyperscalers — US hyperscalers are reshaping the EUR

IG market with substantial, long-duration issuance to fund AI capex. We see this as

a structural theme, prompting us to revise our full-year non-financial issuance

forecast up to €400 billion. This concentrated supply, accounting for 44% of non-

financial net supply YTD, is the primary driver of recent underperformance in the

technology sector. We view this as a technical repricing, not a sign of fundamental

weakness, and favor sub-7Y tenors in the sector.

Resilience Driven by a Yield-Buyer Base — Credit market resilience is a defining