As 2025 draws to a close, credit markets are proving steadier than many expected, defying the weight of inflationary pressures, political uncertainty and uneven global growth. In our latest webinar, Thibaut Cuilliere, Head of Sector Research, Ivan Pavlovic, Energy transition & hybrid Specialist, and Baptiste Reuillon, Bank Specialist delve deeper into the forces shaping credit markets in the final months of the year.

Ivan Pavlovic

Thibaut Cuilliere

Baptiste Reuillon
Despite persistent macroeconomic and geopolitical turbulence, global credit markets have held their ground in 2025. Both European and US corporates have posted solid returns, supported by strong technicals and disciplined investor inflows. While valuations appear increasingly tight, demand for credit remains robust, highlighting the market’s ability to absorb uncertainty. Against this backdrop, select areas of outperformance are emerging – from real estate and mining to financials and regulated utilities – where fundamentals and policy trends continue to drive opportunity.
Credit markets deliver steady gains
Global credit markets have delivered strong performance year-to-date, despite persistent political and economic uncertianty. Europe generated 2.7% of total returns for corporate investment grade, supported in Q2 and Q3 by a net loosening of credit standards for corporates. The US showed even stronger performance at just over 6%, attributed to the softer credit demand but improved conditions. Most segments experienced tighter spreads versus swaps, with high beta names and AT1s emerging as the strongest outperformers.
While investors remain broadly satisfied with performance, an important question lingers: are credit valuations now too tight? Euro high-yields spreads are at their tightest ever contrasting sharply with the wider valuations in non-financial senior investment grade. This valuation tension highlights both the depth of market appetite and the technical factors currently sustaining it.
Those technical continue to favour credit. Record inflows to credit funds have provided steady demand: Lipper-FMI data show €43 billion in year-to-date inflows into European IG funds – a record-breaking figure – and €17 billion higher than the same period last year. At the same time, high-yield funds have attracted €6.5 billion so far this year, double 2024 levels.
In the US, EPFR data report $15 billion in credit fund inflows, up from $14 billion a year earlier. These flows are reinforcing spread tightness and creating a feedback loop of demand and stability across credit markets.
However, not all regions are equally resilient. France remains the greatest source of risk within credit indices, particularly in financials, which have shown greater spread sensitivity than their sovereign counterparts. The underperformance of French credit spreads since the June 2024 snap elections reflects ongoing political uncertainty. Though spreads improved modestly in September, risks will likely persist until the government reshuffle is finalised.
Taking a cross-sector view, spreads remain relatively homogenous despite renewed volatility in cyclicals driven by evolving US trade policy. Natixis CIB continues to identify strong potential for outperformance in real estate, maintaining an overweight stance but with greater emphasis on differentiation. Similarly, the mining sector continues to show value, trading at a premium despite persisting high commodity prices, while aerospace and defence benefit from a sustained policy support and increased global defence spending as Europe seeks greater strategic autonomy.
Data centres and telecoms also offer positive prospects into next year. Meanwhile, chemicals, capital goods, and retail appear less attractive, warranting underweight on. Weak performance is also expected from corporate hybrids, which have become too expensive with the Hybrid-to-CDS multiple falling below its medium-term average – a sign that valuations have overshot fundamentals.
From a currency perspective, risks persist in USD versus EUR spreads. The dollar market offers higher yields but also greater risk of widening. Sector and currency arbitrages are worth putting into place : Natixis CIB recommends overweighing European automotives, telecoms, and healthcare in USD vs €, while oil, tobacco, and mining offer relative more value in € than in USD.
Overall, credit markets are displaying remarkable resilience, with spreads supported by inflows and strong technicals, even as valuations stretch past political noise lingers.
Utilities remain a credit safe haven
The energy sector (utilities and oil & gas groups) saw a drop in performance compared to the year prior, though this was largely expected given the tough comparison base created by the 2022-23 peaks. The trend was more pronounced for oil and gas groups which continue to face headwinds from oversupply and lower refining margins on top of declining oil prices. Without a meaningful reduction in output, volatility in spot prices is likely to persist, with little chance of prices exceeding $65 per barrel before the second half of 2026.
Utilities reaffirmed their EBITDA guidance for the full-year with roughly stable to slightly higher performance expected year-on-year in a majority of cases. EDF still guiding on EBITDA contracting in a range of €7bn-€9bn year-on-year probably looks a bit cautious given the solid performance the group delivered in H1.
Despite these pressures, utilities are positioned as a key pocket of stability within the energy complex. The sector’s increasing focus on regulated activities, particularly the expansion of power networks to support renewable integration and storage capacity deployment, provides predictable revenues and inflation protection, hereby strengthening utilities’ business model.
Indeed, even with a sector challenged by structural circumstance, the relative resilience of utilities underscore how selective exposure within credit markets continues to deliver stability among broader volatility.
Bank fundamentals remain solid
Among major sectors, financials best exemplify the resilience of credit markets in 2025. European banks are maintaining strong profitability despite the interest rate tightening cycle, supported by solid revenues on the back of still high and resilient net interest margins.
Those net interest margins are supported by the normalisation of deposit mix in bank balance sheets that enables to partially offset the decreasing rates on the asset side. Lending volumes remain robust, with households-related credit proving more resilient to uncertainties than corporate lending. At the same time, banks are diversifying into non-interest income, a move that supports earning stability as the rate cycle matures. Balance sheets remain very robust with high Capital Ratios and a good Asset Quality. Overall, Natixis CIB maintains a positive outlook for European banks, with fundamentals expected to remain strong and broadly stable into early 2026.
This still favourable revenue dynamic combined with strong balance sheets further strengthen banks’ ability to absorb external shocks, while systemic risk catalysts – such as sovereign debt pressures or geopolitical crises – currently show minimal traction. Nevertheless, idiosyncratic events cannot be ruled out entirely.
A further positive driver for banks’ fundamentals going forward is M&A in the banking sector where the consolidation momentum continues. This is playing out domestically in Spain and Italy as well as across borders in particular between Italy and Germany and France and Portugal. This is supported by the excess capital generated by recent years of strong profitability across the sector as well as governments’ gradual sale of bank stakes that are creating a number of new acquisition opportunities.
Against this backdrop, Natixis CIB sees value in name-specific trades, particularly in Senior Preferred instruments, which present scope to play decompression in the presently tight market – with opportunities for example to short French names exposed to the domestic political risk against Spanish and Italian peers that should continue to outperform.
Therefore, financials reinforce the broader theme: even amid elevated uncertainty, sound fundamental and strategic rebalancing of business models are supporting credit strength and investor confidence.
Credit resilience set to endure
In summary, spreads are likely to remain tight, with no significant risk of widening before year-end. Credit markets are demonstrating consistent reliability despite persistent geopolitical and trade uncertainties.
Natixis CIB highlights that this stability is not uniform – notably real estate, mining, and defence – stand out as beneficiaries of supportive flows and policy trends, while utilities offer defensive performance anchored by the energy transition. Meanwhile, financials continue to provide stability and selective opportunity through robust earnings and renewed M&A activity.
Ultimately, even as the macroeconomic backdrop remain challenging, credit’s technical strength, disciplined sector differentiation, and steady investor demand suggest that resilience – not fragility – will continue to define the market heading into 2026.