Global Credit Trader Redefining Quality in Credit

Credit Strategy Research 13 August 2026 | 6:46PM EDT

n Against a backdrop of elevated AI-related supply and higher real rates, investors Amanda Lynam, CPA | have been reassessing positioning across the quality dimensions within corporate Goldman Sachs & Co. LLC credit—using rating classifications as an imperfect proxy. Spencer Rogers, CFA | n The catalyst has been the growing tension between solid fundamentals and Goldman Sachs & Co. LLC challenging supply technicals within certain ‘high quality’ rating cohorts. In IG Sara Grut and HY, the highest rating categories (i.e., AAs in IG, and BBs in HY) are | Goldman Sachs International generating historically elevated shares of total debt issuance, driven in large part Shamshad Ali by AI-related financing. The returns within these rating categories also tend to be | the most sensitive to higher interest rates, given their longer duration profiles Goldman Sachs & Co. LLC

and thinner spread ‘cushions’ to buffer total returns. n This backdrop is driving outperformance from the lower-rated cohorts. For example, across the USD and EUR markets, BBBs have outperformed AAs and As on both a total and excess return basis. And in HY, BBs have lagged Bs— especially in the USD market, where AI-related issuance has been more active (vs. EUR). n We have favored BBBs in the USD IG market for a while. We are now adopting a more aggressive stance toward moving down-in-quality within the EUR IG market as well, given our expectation for (higher-rated) AI-related supply to accelerate in the region. n In the USD HY market, we are shifting our rating allocation preference to favor Bs (now overweight) vs. BBs (now neutral), as we anticipate an ongoing supply headwind in the BB cohort. We are also shifting to underweight on CCCs (from neutral). While the excess spread premium in this cohort is notable, it is a highly idiosyncratic group and warrants careful credit selection. We maintain our existing rating preferences in the EUR HY market (overweight BBs, neutral Bs, underweight CCCs). n We have historically had a slight preference for IG vs. HY in the USD market, and a somewhat stronger preference for IG vs. HY in the EUR market (owing to a more challenging growth-inflation-monetary policy mix). That said, we now view the case for an outright IG overweight as less obvious from here and are shifting to a neutral allocation between the groups in both regions.

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Goldman Sachs Global Credit Trader

Against a backdrop of elevated AI-related supply and higher real rates, investors have been reassessing positioning across the quality and duration dimensions in corporate credit.

While IG and HY excess returns were somewhat uniformly under pressure during 1Q2026, a more visible performance gap has emerged between the two rating cohorts over the past few months. HY has outperformed IG in both the USD and EUR markets (Exhibit 1).

We continue to have a modest preference for USD credit over its EUR peer. That said, the regional classification lines are blurring, given the increased frequency of cross-border debt issuance. We expect this geographic overlap to increase, especially if the EUR market absorbs a greater share of AI-related supply.

Exhibit 1: A more visible performance gap has emerged between HY and IG in Q3 Cumulative year-to-date excess return for USD and EUR IG and HY

USD IG USD HY EUR IG EUR HY 2.5

-1.5 Jan Feb Mar Apr May Jun Jul Aug

Source: Bloomberg, Goldman Sachs Global Investment Research

USD IG: BBBs outperform on supply dynamics and a carry cushion

One of our key relative value views in the USD IG market has been a preference for BBBs vs. the higher-rated AA and A cohorts as a way for investors to capture incremental spread without sacrificing too much on fundamental credit quality. In fact, we continue to see the most scope for balance sheet deterioration within the high-end of the IG rating spectrum, where many balance sheets are likely under-leveraged and appear poised to shift capital allocation priorities to…