Corporate Credit Snapshot - June 2026
Snapshot
June 9, 2026
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US
US credit delivered positive returns across the board this month. Despite intramonth interest rate volatility and ongoing geopolitical uncertainty, corporate credit performed well. Yields rose mid-month but eased by month-end as Middle East headlines provided some relief and oil prices moved lower, leading both investment grade and high yield to deliver strong performance driven by spread tightening. Bond markets were more volatile earlier in the month given concerns regarding persistent inflation. By month-end, however, conditions had stabilized. Federal Reserve (Fed) Chairman Warsh was sworn in with the market in wait-and-see mode regarding the Fed’s plans for short-term interest rates. Spreads proved resilient throughout, tightening into month-end, underpinned by strong fundamentals: a healthy tech sector, stable jobs market, strong earnings reports, a robust US energy sector, and historically strong credit quality in the US high yield bond market.
EUROPE
European credit markets delivered positive returns in May. Risk sentiment was broadly positive, driven by mounting hopes of a US-Iran peace deal. This led to declining oil prices, which in turn led investors to dial back the number of expected European Central Bank hikes—although a June hike is still widely expected as is a second hike by the end of the year. The Bank of England saw similar repricing with markets now expecting only one 25 basis point hike this year. European rates therefore outperformed their US counterparts, supported further by softer macro data out of Europe. Primary market activity was dominant; technology-related supply accounted for a significant share of corporate issuance which weighed on spreads, resulting in the sector being one of the worst performing year-to-date. In secondary markets, spreads proved sturdy despite the ongoing Middle East conflict and record primary issuance supply; this has been primarily supported by elevated yields which continue to drive demand for the asset class, with particular interest seen from insurance accounts and fixed maturity funds. In high yield, the market has been shrinking since its 2022 peak due to upgrades, however an uptick in new issuance and a slowdown in rising rates are bolstering renewed market growth. Looking ahead, Eurozone consumer prices, producer prices, and retail sales data will all be reported early in June.
EM
Emerging markets (EM) debt gained in May. Within EM, sovereign debt, which benefitted from frontier and distressed exposure, modestly outperformed corporate debt; Ukraine and Egypt were strong performers, while Romanian sovereigns benefitted from falling government yields. Within EM corporate credit, high yield outperformed investment grade. Asian high yield was the top performer—driven by strong contributions from Chinese property as further evidence emerged that the sector’s prices have troughed. Notable contributions also came from Indian commodity-linked securities. In EM investment grade, rate movements dominated total returns. Europe, Middle East & Africa (EMEA) outperformed given its close linkage to the European rates curve, while Latin American investment grade lagged its peers due to a longer US dollar duration profile. At the sector level, financials outperformed: Middle Eastern banks rallied as the ceasefire held and prospects for a more durable agreement improved, while Eastern European banks benefited from falling government yields. Transportation was the other sector winner, tracking the tailwind from declining energy prices.
OUTLOOK
Investor confidence seems to have largely returned, with risk appetite recovering as US-Iran negotiations ended the month tantalizingly close to a deal. The resolution of the Middle East conflict remains the dominant swing factor for energy prices, inflation, and, ultimately, central bank policy in the months ahead. Correspondingly, the question of whether elevated energy prices prove transitory or structural is becoming increasingly difficult to avoid. Central banks appear to be adjusting accordingly, and government bond curves have bear-flattened across the US, UK, and Germany, reflecting both higher neutral rate expectations and rising fiscal pressures. Against this backdrop, we see regional divergence persisting—European data softening while US fundamentals remain resilient—with credit spreads appearing to price in limited downside despite the uncertain macro environment. Consequently, we continue to favor short-duration credit where yields remain attractive in our view, while selectively adding higher-quality high yield where we believe fundamentals justify the spread. Demand for income should continue to underpin credit markets, though geopolitics and the evolving energy supply picture are likely to remain the dominant market drivers in the months ahead.
Past performance is not a reliable indicator of current or future performance.
Muzinich views and opinions are for illustrative purposes only and not to be construed as investment advice.
This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed by Muzinich & Co. are as of May 2026 and may change without notice.
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