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Morgan Stanley Global Credit Report Summary (January 27, 2025)

Overview of Market Performance

• US Credit: IG spreads tightened 2bp, HY spreads tightened 7bp, resulting in excess returns of 15bp and 24bp respectively. Inflows reached $1.6bn and $1.4bn in HY for the week. Media, telecom, and tech outperformed IG sectors, while utilities lagged; financials underperformed non-financials, with strong HY supply measured at $1.6bn.
• EU Credit: IG spreads tightened 3bp with single As outperforming, while HY spreads tightened 10bp. Austria and media outperformed, while consumer goods lagged relatively.
• Asia Credit: The overall credit spread tightened 1bp. Within Asia, China's HY spread stopped widening and contracted by 24bp, signaling stability.

Additional Key Points

• High-yield credit spread tightening reached 7bp in the US, while IG narrowed by 2bp, creating a clearer risk premium.
• Across various regions, IG credit outperformed HY in most cases, but this varied by location and sector.
• Equity-oriented sectors like media and retail showed strong performance in IG relative to defensive ones.
• No clear overall trend emerges from the data, as individual market factors weighted differently.

Equity Exposure

Equity allocations relative to IG and HY included various strategies, showing an overall neutral positioning in some markets.

In summary, Morgan Stanley noted global credit markets in early 2025 showing strength in higher-rated credits and tightening spreads, with mixed performances across fixed income markets in different regions.