economy
Higher-rated corporate debt might not be the best trade. Goldman weighs in on credit quality
Amid higher real rates and an elevated AI-related supply, investors are reassessing positioning within corporate credit.
TL;DR
- Investors are reassessing corporate credit positioning due to higher real rates and elevated AI-related supply.
- Higher-rated debt (AA and BB) is more sensitive to interest rate changes due to longer duration and thinner spreads.
- Lower-rated debt, particularly BBB, has been outperforming higher-rated debt.
- Goldman Sachs favors BBBs in the USD IG market and is adopting a more aggressive stance on moving down-in-quality in the EUR IG market.
- Goldman is shifting its preference from BBs to lower-rated Bs due to expected supply headwinds.
- The firm has shifted its stance on CCCs to underweight, citing idiosyncratic risks despite notable excess spread premiums.