Issuance in the US high-yield marketslowed to roughly $5 billion during the shortened holiday week. Despite lighter volumes, weaker-rated issuers remained active.
Michaels raised approximately $2.75 billion in US dollars through a two-part secured offering. The transaction included a 7-year non-call 3 senior secured first-lien bond priced at a yield of about 8.5% and a second-lien tranche with an 8-year non-call 3 structure priced near 11%. The first-lien notes were rated B1/B- (Moody’s/S&P), while the second-lien tranche carried lower ratings in the single-B to triple-C category. Proceeds were used to refinance existing debt and extend maturities.
We have featured Michaels’ bonds several times in our Top Picks (see the latest here) . From our initial highlight to today, the bond has delivered a return of over 60% in U.S. dollars over a seven-month period. With the refinancing now completed, the investment case has largely played out as expected. If you are not yet subscribed, you can join our newsletter to receive future bond highlights and updates.
Average spreads in the high-yield market remained below 300 basis points, indicating that risk premiums are still relatively tight. High-yield bond funds recorded modest outflows of around $150 million, extending the previous week’s withdrawals. The combination of tight spreads and refinancing-driven issuance suggests that investor appetite remains present, but is increasingly selective and focused on balance sheet repair rather than aggressive leverage.
US investment-grade issuance reached approximately $28 billion, below earlier forecasts of $30 to $40 billion. Average spreads stood near 80 basis points, close to post-financial crisis tights, reflecting strong demand for higher-rated credit. Utilities and power-related borrowers were active, alongside industrial and healthcare names, and hybrid bonds also attracted interest. Strong inflows continue to provide technical support for the primary market, although tight spreads leave limited room for further compression.
US Treasury yields fell by roughly 4 basis points initially during the week before reversing and ending about 2 basis points higher across the curve as investors reacted to shifting tariff announcements and weaker economic data. Preliminary US fourth-quarter GDP growth came in near 1.4%, below expectations around 2.8%, while core personal consumption expenditures, or PCE, the Federal Reserve’s preferred inflation measure, remained close to 3%. The announcement of new global tariffs of up to 15% renewed concerns about fiscal deficits and inflation pressure. Credit default swaps tightened modestly in both investment-grade and high-yield indices. For bond investors, the key takeaway is that rate volatility persists, but credit spreads have so far remained contained.
Artificial intelligence continues to influence credit markets through increased capital expenditure by large technology companies. Nvidia is reportedly close to investing around $30 billion in OpenAI as part of a broader funding round exceeding $100 billion. Forecasts for US investment-grade technology bond issuance this year have been raised toward $360 billion, reflecting significant borrowing needs linked to data centers and AI infrastructure. Goldman Sachs also lifted its projection for total US investment-grade issuance to about $2.1 trillion in 2026. For bond investors, this suggests that high-grade supply may remain elevated, supported by structural funding needs rather than short-term refinancing alone.
Concerns about rising defaults in the leveraged loan market are beginning to affect retail funds invested in collateralized loan obligations, or CLOs. CLOs bundle leveraged loans into bonds with different risk levels. Funds exposed to CLO equity, the riskiest slice that absorbs first losses but earns higher income in strong markets, reduced monthly dividends as loan yields narrowed and anxiety about future defaults increased. Roughly 13% of leveraged loans are tied to software companies, a sector facing uncertainty as artificial intelligence reshapes business models. Share prices of several closed-end CLO equity funds fell to multi-year lows. Dividend reductions highlight how income expectations in higher-risk credit segments can adjust quickly when market conditions change.
Rating activity remained elevated across regions, with more downgrades than upgrades in North America during the week. Brazilian steelmaker CSN was downgraded to B2 by Moody’s, reflecting leverage expected to remain around 5 to 6 times debt to EBITDA. In contrast, Lumen was upgraded by Moody’s to B2 from B3 after reducing debt through asset sales and restructuring efforts, with leverage projected to fall closer to 4 times by 2026.
Côte d’Ivoire raised $1.3 billion in US dollars through a 14-year amortizing bond priced at a yield of 7.125%, 62.5 basis points inside initial guidance. The senior unsecured note was rated Ba2/BB/BB and attracted orders of more than $3.3 billion, about 2.5 times the issue size. The structure features principal amortization between 2039 and 2041, resulting in a 14-year weighted average life.
Panama raised $2.98 billion in US dollars via an 8-year bond priced at 5.227% and a 12-year bond at 5.662%, both around 35 basis points inside guidance. The bonds were rated Baa3/BBB- and included soft bullet amortization structures. Proceeds are being used partly to fund a tender offer for outstanding global bonds.
Cameroon tapped its 8.875% 2033 US dollar bond, raising $100 million at a yield of 9.7%. The senior unsecured note is rated B-/B.
Kenya raised $2.25 billion in US dollars across a 7-year bond at 8.10% and a 12-year bond at 8.95%, rated B/B-, with demand roughly twice the issue size. The sovereign also launched a tender offer to buy back portions of its 2028 and 2032 bonds.
Tullow Oil’s 10.25% US dollar bond due May 2026 (ISIN USG91237AB60) rose to around 88 cents on the dollar following an agreement with bondholders to delay principal repayment. At that price, the yield remains in the mid-teens range, reflecting ongoing credit risk despite improved near-term liquidity.
In contrast, Chinese property developer Country Garden repaid roughly $398 million following its restructuring, yet its US dollar bonds continue to trade near 9–10 cents on the dollar, indicating very low recovery expectations and persistent restructuring risk.