Our credit experts review how credit markets fared in the second quarter of the year and share the latest scorecards for the global credit universe.
5 Aug 2025
Darpan Harar
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Market summary
In another strong quarter overall, significant dispersion across global credit markets remained in evidence – the environment continues to be highly conducive for active credit investing.
Among traditional credit markets, the high-yield corporate bond market was one of the top-performing segments, benefiting from positive sentiment as trade tariffs were paused. Credit spreads in the US high-yield market ended Q2 close to their tightest (most expensive) levels of the past decade.
In more specialist segments, the loans market delivered solid performance after quickly shrugging off initial tariff-induced volatility (a common theme across credit markets); the bank capital market, or AT1s, also had a strong Q2 – here, fundamentals remain supportive, but selectivity remains key.
A healthier appetite for risk was also in evidence in the collateralised loan obligation (CLO) market, where riskier (lower-rated) tranches outperformed, partly thanks to tightening credit spreads.
Where to focus and what to avoid
Higher-carry (higher-income) holdings – such as structured credit (including agency mortgage-backed securities), loans, and selective parts of the short-duration high-yield and bank capital markets – offer an attractive income profile and favourable downside characteristics.
In more traditional markets – such as US high-yield debt and US investment grade – credit spreads remain near the tightest (most expensive) levels seen over previous cycles; we see limited potential here for further price appreciation or attractive income.
Our sector positioning favours areas such as utilities and financials, which are domestically oriented and therefore less likely to be impacted by trade tariffs.
This communication is provided for general information only should not be construed as advice.
All the information in is believed to be reliable but may be inaccurate or incomplete. The views are those of the contributor at the time of publication and do not necessary reflect those of Ninety One.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
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