Goldman Sachs has highlighted a shift in investor sentiment regarding corporate credit ratings, noting that while traditionally higher-rated categories like AA and BB have dominated debt issuance, their longer durations and thinner spreads make them more vulnerable to rising interest rates.
The firm observed that lower-rated debt, particularly BBB-rated bonds, has been outperforming higher-rated counterparts, prompting a strategic pivot. Goldman is now favoring BBBs in the U.S. investment-grade market and is adopting a more aggressive approach towards lower-rated Bs in the European investment-grade market, anticipating an increase in AI-related supply.
However, the bank has downgraded its outlook on CCC-rated debt to underweight, emphasizing the need for careful credit selection due to the idiosyncratic nature of this group