JPM JPM Daily Credit

Nathaniel Rosenbaum, CFA AC ( Pavan D Talreja, CFA ( North America Credit Research JPMORGAN J.P. Morgan Securities LLC J.P. Morgan Securities LLC 10 September 2026 Silvi Mantri ( J.P. Morgan Securities LLC

JPM Daily Credit Strategy Update 2Q26 HG Credit Fundamentals Review: Stronger earnings and lower leverage, but the AI buildout is reducing the fundamental strength of higher-rated issuers; Curveball published We published our HG Credit Fundamentals: 2Q26 Review yesterday. The highlights are:

On balance, credit fundamentals strengthened for US HG in 2Q26, with Revenue (+10.5% YoY) and EBITDA (+15.8% YoY) growth both the strongest since 3Q22. Energy was a key positive contributor, with revenue up 12.3% YoY thanks to higher oil prices. Overall gross leverage fell by 0.1x YoY to 3.0x, the lowest since 4Q23.

There were, however, a few negatives beneath the surface this quarter: EBITDA margins compressed for the first time since 2Q23. Debt rose 7.8% YoY, down from 8.5% in 1Q26 but still above the prior 3yr average of 5.7%, though this acceleration remains hyperscaler centric. Interest expense increased by 7.0% YoY, the most since 2Q25 and the 16th consecutive quarterly increase, though ex-Hyperscalers it slowed to 5.0%, a four quarter low. Interest coverage was unchanged YoY at 10.3x as higher EBITDA offset rising interest expense. Nevertheless, companies were more disciplined on buybacks, with the earnings payout ratio at 33.3%, a 15 year low.

Inside, we break out credit metrics for the hyperscalers vs. the rest of the HG universe and separately assembled baskets of HG credits based on their composite credit score, both on an absolute basis and recent change. Hyperscalers remain structurally less levered than the broader HG market, with gross leverage of 1.6x, half that of the rest of HG and down 0.1x QoQ even as debt grew 92% YoY to fund AI buildouts, a sign of successful monetization.

The fundamental advantage of higher rated issuers narrowed YoY as gross leverage for A and above rated issuers held steady at 1.9x while BBB leverage improved to 4.1x, reducing the gap to 2.1x, the narrowest in seventeen quarters as AI capex weighed further on still strong hyperscaler credit metrics.

Figure 1: Hyperscalers are a positive contributor to HG top-line metrics Figure 2: EBITDA improvement led by both Commodities and TMT but vs. negative for balance sheet metrics only one is also cutting debt 100% 92% 15.0% 14.1% YoY change in credit metrics Debt QoQ EBITDA QoQ 81% 80% Overall Hyperscalers Ex-Hyperscalers 10.0% 60% 6.6% 4.2% 5.0% 40% 2.0% 27% 1.0% 24% 19% 16% 20% 14% 0.0% 11% 9% 8% 8% 4% 0% -2.5% Revenue EBITDA Debt Capex -5.0% Commodities TMT Others Source: J.P. Morgan. Source: J.P. Morgan.

We also published our weekly Curveball yesterday:

High Grade spread curves steepened in the front-end and long-end as 5yr and 30yr bonds underperformed. The 3s5s curve steepened by 1.1bp WoW to 20bp, its steepest level since April 2025. The 10s30s spread curve steepened by 0.8bp WoW to 19bp, and is at 58% of its 6m range. Ex-Hyperscalers, the 10s30s curve is at 15bp, 1.2bp steeper WoW, while the much steeper hyperscaler 10s30s curve is at 41bp, flatter by 1.4bp WoW. The 5s10s curve flattened modestly by 0.3bp WoW to 27bp and is at 73% of its 6m range. The 2s30s UST curve flattened by 2bp as long-end yields declined 3bp and outperformed other parts of the treasury curve.

Nathaniel Rosenbaum, CFA AC ( Pavan D Talreja, CFA ( North America Credit Research JPMORGAN JPM Daily Credit Strategy Update J.P. Morgan Securities LLC J.P. Morgan Securities LLC 10 September 2026 Silvi Mantri ( J.P. Morgan Securities LLC

The 3s5s curve steepened by 1.1bp WoW and by 2.6bp MoM to 19.9bp. The 3s5s issuer curves for VLTO (9bp WoW) and ADI (9bp WoW) steepened the most while PYPL (-14bp WoW) and F (-12bp WoW) flattened the most WoW. Currently, ES (20bp, 100%) and VLTO (26bp, 100%) are at the steepest level while F (12bp, 0%) and MPLX (16bp, 0%) are at the flattest level in their 6m range.

The 5s10s curve flattened by 0.3bp WoW and by 0.2bp MoM to 26.8bp. The 5s10s issuer curves for COXENT (11bp WoW) and ADM (10bp WoW) steepened the most while EPD (-10bp WoW) and WES (-7bp WoW)…