Investing Smart: Identifying Key Opportunities in Global Credit

The reopening of the Strait of Hormuz has reduced inflation concerns. While tight credit spreads limit upside, fundamentals and technicals remain supportive of fixed income markets. We are modestly constructive but cautious, particularly on private credit, where complacency around liquidity risks appears underappreciated.

The closure of the Strait of Hormuz reignited inflation concerns and prompted major central banks into a more hawkish stance. While inflation has risen, we believe the shock is temporary, making further ECB and Fed tightening unlikely. An additional hike from the BoJ is likely, in our view, but it risks moving too slowly.

EM fixed income stayed resilient through the war-induced shock. As oil prices fell, inflation remained contained. Capital inflows resumed after a brief interruption and sovereign rating upgrades continued. We believe the asset class is supported by elevated global risk appetite, attractive local-currency yields, and diversification away from US assets.

The investment grade market faces an AI-driven supply surge as hyperscalers reshape credit dynamics. In high yield, surface stability masks elevated issuer dispersion and structural divergence, while CHF markets remain supported by benign inflation, strong demand, and favorable seasonal dynamics.

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As we head into the summer, credit markets are navigating an increasingly complex landscape. Inflation pressures are building up - particularly in Europe - while central banks are diverging in their policy responses, with most preparing for tighter monetary policy. Meanwhile, recent market volatility has created dispersion across sectors and rating categories, opening doors for active managers.