Global Markets Daily Europe’s Fixed Maturity Funds — A Fading Marginal Tailwind for EUR Credit

Economics Research 18 August 2026 | 2:29PM BST

Global Markets Daily: Europe’s Fixed Maturity Funds — A Fading Marginal Tailwind for EUR Credit

n A key pillar supporting tight index-level credit spreads in recent years has been Sara Grut | strong demand from yield-based investors. In Europe, a distinctive source of Goldman Sachs International

support has come from retail investors through fixed-income target maturity funds. We estimate these funds have accumulated roughly €270 billion in assets under management since 2021, a meaningful technical tailwind for the EUR IG market, which sees an annual average of €200 billion in net supply. n We take a closer look at this source of demand for EUR credit and its forward-looking implications. While AUM growth remains positive, it has slowed alongside a moderation in EU household allocations to fixed income. Fund holdings also point to a more conservative allocation across recent vintages, likely reflecting European retail investors’ preference for a relatively safe alternative to cash. n For inflows into fixed-maturity funds to re-accelerate meaningfully, the asset class would likely need to offer a more compelling yield pickup relative to cash. In practice, that would require taking on more duration or credit risk, where retail investor appetite still appears limited. In addition, for retail investors willing to move beyond cash, strong European equity returns have become a more meaningful competitor for marginal savings. n Overall, while retail flows remain a positive tailwind for EUR credit, we think they are becoming less supportive at the margin. Combined with the prospective supply headwind from AI-related capex financing, this reinforces our expectation that EUR IG spreads will widen modestly into year-end.

Europe’s Fixed Maturity Funds — A Fading Marginal Tailwind for EUR Credit

One of the key pillars supporting tight index-level credit spreads in recent years has been strong demand from yield-based investors following the 2022-23 hiking cycles from the Fed and the ECB. We recently highlighted this dynamic in the USD market, where pension and insurance demand has provided an important technical tailwind.

In Europe, institutional demand also matters, but the more distinctive source of support has come from retail investors through fixed-income target maturity funds. In this Global Markets Daily, we take a closer look at that source of demand for EUR credit and assess the forward-looking implications. Our conclusion is that this source of support should remain positive, but the incremental impulse is fading.

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A renewed acceleration in retail demand would likely require a more compelling return vs. cash, which in practice means taking more duration or credit risk than fixed-maturity funds usually advocate, absent a further rise in risk-free rates, which is not our expectation. At the same time, strong equity market performance and still-low household equity allocations suggest that fixed income is now competing more directly with equities for marginal savings.

Taken together, we think the retail technical backdrop for EUR credit is becoming less supportive at the margin. Combined with the prospective supply headwind from AI-related capex financing, this reinforces our expectation that EUR IG spreads will widen modestly into year-end.

Household fixed-income allocations: High, but no longer accelerating

Exhibit 1 (left panel) shows the allocation of EU household financial assets across deposits, fixed income, equities and other assets. Excluding pension and insurance fund holdings, the share allocated to fixed income has risen sharply since 4Q2022, from roughly 10% of financial assets to almost 15% currently. That is the highest allocation to fixed income in more than a decade.

The increase has been concentrated in longer-dated fixed-income assets and interrupted the prior rise in deposits. More recently, however, the pace of reallocation into fixed income has…