The resilience of the credit market
23 DEC, 2025
By Clémence Arrighi, Fixed Income Portfolio Manager, and Andreea Jusselin, High Yield Portfolio Manager, Crédit Mutuel Asset Management
In the credit market, despite some episodes of volatility, carry-driven inflows have supported performance and kept risk premia at historically low levels this year. In fact, carry – above 5% in high yield and over 3% in investment grade – has attracted significant inflows into European credit funds.
Investment grade and high yield funds have raised €43 billion year to date, enabling the market to absorb a record volume of primary issuance. Since the beginning of the year, investors have absorbed €742 billion in IG primary issuance and €116 billion in HY issuance.
Issuance conditions remain favorable: low or even negative new-issue premiums, offerings oversubscribed by more than three times, and a growing presence of multi-tranche deals from issuers such as Alphabet and L’Oréal.
Credit resilience is underpinned by solid fundamentals and supportive technical factors.
In this environment, we favor financial debt – both senior and subordinated – as well as non-financial issuers, regardless of their rating (IG or HY). The spread between bank and corporate debt has narrowed, while banks remain more exposed to sovereign risks.
The expected seasonal slowdown in the primary market toward year-end, generally positive quarterly earnings, a low default rate in the high yield segment (expected to decline further in 2026), and sustained demand for carry are all factors supporting the performance of IG and HY asset classes.
We remain cautious about the risk of credit spread widening, given their currently historically low levels.
We prefer euro-denominated bonds, which we consider more attractively valued and which offer better currency hedging compared with the U.S. dollar.
In the absence of major shocks, carry should remain the main driver of performance. We also favor high-quality, defensive sectors and the intermediate part of the yield curve.
In an environment where growth prospects appear favorable and technical factors remain dominant, we maintain a constructive view on credit, especially in carefully selected segments.
Crédit Mutuel Asset Management is an asset management company of Groupe La Française, the holding company for the asset management arm of Crédit Mutuel Alliance Fédérale.
