UBS expects 2026 to be a record year of supply for fixed income in the US, accelerated by AI-driven capex and a strengthening M&A pipeline.
UBS forecasts investment grade (IG) issuance to reach US$1.7 trillion, high yield (HY) US$365 billion, and leveraged loans (LL) US$450 billion.
Volumes have already exceeded historical averages this January, the report notes, adding that concerns of widening spreads are overstated.
“Despite the sheer size of expected supply, we do not see issuance as a catalyst for wider spreads or materially higher rates – supply is never a good predictor of spreads according to our models. Instead, we think today’s tight spreads underprice emerging risks stemming from a softening US labour market, weakening US consumer dynamics, and rising fragilities in global private credit,” it states.
Technology supply will contribute US$1 trillion across public and private markets, the bank predicts, with a HY/IG/LL/private split of US$300/60/140/400 billion.
“Despite heightened equity volatility around AI, credit markets have shown limited dispersion in hyperscaler bond performance, while remaining very sensitive to issuers that materially re-levered as illustrated by Oracle’s notable underperformance in 2025,” the report observes.
It advises that investors should avoid AI beneficiaries with weak or negative free cash flow or capex profiles and elevated net debt and EBITDA profiles.
European companies are issuing in USD at unprecedented levels, a trend UBS expects to continue. Retail, auto, pharma and tech companies are the most active in the space, it says. The bank predicts a decline in EUR supply, dipping to €750 billion in IG issuance, €95 billion in HY and €85 billion in leveraged loans.
While the M&A pipeline is recovering in the US, the same cannot be said for Europe, the bank argues – due in part to geopolitical uncertainty and low capacity utilisation. It expects Reverse-Yankee activity to remain muted.
In a report examining private debt trends across the region, the European Fund and Asset Management Association (EFAMA) notes that the European private credit market reached approximately €430 billion in 2024.
Upcoming changes to the Alternative Investment Fund Managers Directive (AIFMD) will allow private debt funds to more efficiently operate across European borders, EFAMA notes, highlighting the importance of harmonised regulation across the bloc. It advocates for the development of a regulatory ecosystem that allows European private debt funds to compete with US-based solutions and reduce reliance on bank funding.
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