Barclays_Global_Credit_Outlook_Not_just_sunshine_and_rainbows

This document is intended for institutional investors and is not subject to all of theindependence and disclosure standards applicable to debt research reports prepared for retailinvestors under U.S. FINRA Rule 2242. Barclays trades the securities covered in this report for itsown account and on a discretionary basis on behalf of certain clients. Such trading interestsmay be contrary to the recommendations offered in this report.Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companiescovered in its research reports. As a result, investors should be aware that the firm may have aconflict of interest that could affect the objectivity of this report. Investors should consider thisreport as only a single factor in making their investment decision.This research report has been prepared in whole or in part by equity research analysts basedoutside the US who are not registered/qualified as research analysts with FINRA.FOR ANALYST CERTIFICATION(S) PLEASE SEE PAGE 347 .FOR IMPORTANT EQUITY RESEARCH DISCLOSURES, PLEASE SEE PAGE 348 .FOR IMPORTANT FIXED INCOME RESEARCH DISCLOSURES, PLEASE SEE PAGE 348 .Global Credit OutlookNot just sunshine and rainbowsLate-cycle extension will shape 2026. We expect solidfundamentals and benign macro to meet surging supply,rising animal spirits, and tight valuations. Spreads shouldedge wider as dispersion and tail risks rise. Yields continue toanchor demand and we expect positive total returns acrossmarkets.OverviewNot just sunshine and rainbows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Deteriorating technicals amid rising animal spirits, coupled with tight valuations, are likely tooutweigh a benign macro backdrop and solid fundamentals. We see modestly wider spreads inmost markets in 2026. High all-in yields should help, with positive total returns expected acrossall markets.FICC ResearchCredit Strategy3 December 2025SIGNATUREBradley Rogoff, CFA+1 212 412 7921bradley.rogoff@barclays.comBCI, USDominique Toublan+1 212 412 3841dominique.toublan@barclays.comBCI, USSoren Willemann+44 (0) 20 7773 9983soren.willemann@barclays.comBarclays, UKCompleted: 03-Dec-25, 05:16 GMT Released: 03-Dec-25, 05:34 GMTRestricted - ExternalCompleted: 03-Dec-25, 05:16 GMT Released: 03-Dec-25, 05:34 GMTRestricted - ExternalUS Investment GradeShifting winds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30We forecast spreads at 90-95bp by YE26 vs. 80bp now, implying 0%/4.25% excess/total return.We see a mild sell-off because of tight starting spreads, late-cycle lower capital discipline andhigher supply while macro/fundamentals are in a good spot, which should create opportunities.US High YieldOpportunity amid asymmetry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Valuations are asymmetrically postured across much of high yield heading into 2026, and weexpect spreads to widen modestly next year, to 310