In this edition of Instant Insights, our key takeaways from recent articles include the following: our inaugural global tariff rating actions tracker, effects of tariffs on consumer products, retail and capital goods sectors in the U.S., banks' problem loans in China, and our latest global auto outlook. We dive into global corporates' first-quarter earnings, China LGFVs, Korean petrochemical companies, U.K. student accommodation projects, Saudi residential real estate, the growth of the Saudi stock exchange Tadawul, insurance in Asia-Pacific and Korea, and banks in EMEA emerging markets, China, and Saudi Arabia. We also feature our 2024 annual default and rating transition study on U.S. public finance, Global Credit Markets Update, Investment-Grade Credit Check, This Month In Credit, JHF RMBS performance watch, as well as key public finance sectors to watch amid tariffs and federal policy shifts, the renewable power sector, electric utilities, the auto loan ABS tracker, and the CMBS delinquency rate in the U.S.

S&P Global Ratings periodically updates this article, which contains an edited compilation of key takeaways from our most up-to-date thought leadership organized by sector, region/country, and publication date (see table 1).

Table 1

Key Takeaways From Our Most Recent Reports

Credit conditions

1. Global Credit Conditions Special Update: Ongoing Reshuffling, April 11, 2025

• Trade tensions are threatening what has been a favorable credit conditions environment for most borrowers. The April 2 tariff announcements by the U.S.--and the subsequent escalation in the trade conflict between the U.S. and China--went far beyond what financial markets had imagined and exceeded our previous assumptions. If the paused U.S. tariffs are ultimately implemented in full, the economic fallout would be broad and deep.
• Market volatility and increasing investor risk aversion pose the most imminent risks to credit in this environment. Borrowers are having to pay up for financing and, worse, some lower-rated borrowers could be shut out of the capital markets.
• President Trump's 90-day pause of most tariffs didn't remove the uncertainty around what could ultimately occur. Unresolved trade tensions as the partial pause approaches its end could have a visible impact on credit quality.

2. CreditWeek: How Will Credit Conditions Evolve Amid Market Volatility And Investor Risk Aversion?, April 18, 2025

• The most imminent risk to credit in this environment is market volatility and increasing investor risk aversion. Sharp declines in equities could force market participants to sell safer assets to raise liquidity to meet higher margin requirements.
• While borrowers entered this period with solid credit fundamentals (having benefited from a stretch of supportive conditions), some lower-rated borrowers could ultimately be shut out of the capital markets until more clarity appears. This could push default rates upwards toward our pessimistic scenarios of 6% in the U.S. (from 4.7% as of February) and 6.25% in Europe (from 4% in the same period) by year-end.
• We expect the overall slowing of global economic activity to weigh on the growth of financial institutions, particularly in countries targeted with the most severe levies, which would weaken business and consumer confidence. For sovereigns, the key risks over the next quarter emanate from the secondary effects of trade instability.

3. Credit Conditions Asia-Pacific Special Update: U.S.-China Ties In Uncharted Territory, April 15, 2025

• Asia-Pacific credit conditions to deteriorate: The recent escalation in China-U.S. relations and uncertain U.S. trade policy are hitting growth and confidence in Asia-Pacific. With market volatility persisting, tighter financing conditions will compound liquidity strains. Taken together, these developments are negative for Asia-Pacific credit.
• Tariff risks linger: The threat and imposition of tariffs by the U.S. will slow global trade and confidence. The region's dependency on exports with China and the U.S. will have an outsized hit on manufacturers and small economies. Should the tariffs announced on April 2, 2025 resume for economies ex-China, the geopolitical and economic fallout will be deep.
• China's growth falters: Persistent tariffs on Chinese exports reduce competitiveness and new business investments. Real estate challenges and a gloomier backdrop will sap confidence further. Chinese exporters could cut prices to offload excess capacity. Pain among Asia-Pacific domestic manufacturers could intensify, hitting margins.
• Contagion risk spreads: U.S. trade policy uncertainty is causing risk aversion. In a flight to safety, lenders are demanding higher-risk premiums and turning selective. Riskier assets are seeing tighter financing access. Should sharp asset-repricing occur, it could worsen market volatility and constrict capital raising (even for investment grade issuers).

4. Credit Conditions North America Special Update: Tariff Turmoil, April 17, 2025

• The intensifying global trade tensions—including the escalation in trade conflict between the U.S. and China—are weighing on credit conditions in North America amid slowing economic activity and heightened investor risk-aversion.
• Sharply higher tariffs are a top concern for corporate borrowers, threatening to hurt profits for those exposed to imports and international markets.
• We estimate the chance of a U.S. recession at 35%, as price pressures and tariff uncertainty erode business and consumer sentiment and outlays. A sharper-than[1]expected economic downturn in the region could cause more severe credit stress.

Autos

5. Global Auto Outlook: From Drive To Dive, May 6, 2025

• The automotive sector has found itself on the front line of the U.S. administration's trade conflict, and S&P Global Ratings expects tariffs to weigh on the already challenged environment for light vehicles sales and production in 2025 and 2026, outside China.
• We now consider it very unlikely that light vehicle sales and production will return to their previous pinnacle of 90 million units in the next three years.
• President Trump's executive orders, signed on April 29, 2025 only partially relieve the disruption we anticipate for light vehicle original equipment manufacturers and suppliers. Permanent U.S. tariffs, which we now assume, will affect credit quality across the global auto sector.

Capital goods

6. U.S. Capital Goods Companies Price In Tariff Costs To Defend Credit, May 8, 2025

• S&P Global Ratings believes only about 15% of issuers in U.S. capital goods could be at risk of a negative rating action in the next year if tariff costs or slower demand weaken credit ratios.
• We estimate the current 24% effective tariff rate in the U.S. will push up total costs in the U.S. capital goods sector by 8%-10% in the next year. Based on that, we expect price increases of 6%-8% will be necessary to hold profits steady.
• Risk to ratings appears modest overall in U.S. capital goods, given expected pricing actions, muted direct exposure to tariffs, and generally good credit buffer.
• In a worst-case scenario with no mitigation, EBITDA in the sector could drop 35% for tariff costs, which would approximate a severe cyclical profit downturn.

Consumer products

7. Consumer Products And Retail: Durable Goods And Apparel Brace For The Brunt Of U.S. Tariffs, May 2, 2025

• An additional 145% tariff on consumer goods imported from China will have the greatest impact on durable and discretionary goods. Even with lower rates that remain above 50%, we believe this could materially impair issuers.
• Our bottom-up analysis of each consumer products and retail issuer reveals that effective tariff rates will vary depending on exposure. If tariffs announced April 2, 2025, are implemented as proposed following the 90-day pause, it becomes more difficult to shift sourcing to lower-cost regions and puts more pressure on profit.
• Sectors most affected include durable goods, apparel, and potentially consumer staples that rely on other imported inputs such as cocoa and coffee. We point out rating actions on credits highly exposed to tariffs and those we think are susceptible to tariff risk.
• Based on current tariff rates on China imports, we could review 10%-15% of consumer products issuers and 5%-10% of retail issuers for negative rating actions, with more after the 90-day pause if implemented rates remain high.

Corporates

8. Corporate Results Roundup Q1 2025: Sentiment slumps and earnings estimates erode as tariff tensions grow, May 7, 2025

• The global Q1 2025 results season for rated nonfinancial corporates is 40% through, with results in for 1,000 companies that report quarterly. Some 57% of North American results are in, versus 25% in Europe and 24% in Asia. Given the potential impact of U.S. tariffs – planned, pending, and in-effect –what companies are saying about tariffs is gaining greater scrutiny than Q1 results themselves.
• Earnings call transcripts show a sharp deterioration in corporate sentiment. Greater pessimism is apparent across all regions and ratings categories, with Europe seeing the biggest deterioration at present, followed by Asia-Pacific and then North America. North American corporate sentiment has been more positive than other regions for the last several years, but tariff tensions have sharply eroded this differential, if not eliminated it. The impact on sectors varies by region, but cyclical sectors have seen the sharpest declines, notably capital goods, consumer products, autos, and oil (see pages 4-7 for more detail).
• Market consensus estimates for rated entity earnings have fallen. Globally, the average change in consensus estimates for FY 2025 local currency revenues and EBITDA between April 1 and May 7 is -0.6% and -1.8%, respectively (see pages 8-11 for more detail). Average estimates for capex have risen globally but have declined 0.3% in North America. The impact on forecasts varies significantly by industry, with relative resilience apparent in sectors like real estate and utilities, and greater pressure on cyclical and tariff-sensitive sectors. Consensus EBITDA forecasts have fallen for all sectors in North America.
• Q1 results so far show a further upturn in actual revenues and EBITDA. Measured at an annual rate, global revenues for companies rated by S&P Global Ratings that report quarterly are up 1.9% based on current results versus 1.3% in Q4, and EBITDA expanded 5.4%, up from 3.7% last quarter. Sector contributions are similar to last quarter, with technology contributing the most, and oil and gas earnings the biggest drag on growth. Margins are still expanding for most sectors, and interest pressures continue to ease although financing concerns have risen amidst market volatility.

9. CreditWeek: Will Supply-Chain Uncertainties Weigh On Ratings?, May 1, 2025

• While supply-chain pressures have continued to diminish from their COVID highs, it remains to be seen what impact the recent global tariff announcements will have on economic, credit conditions, and supply-chain uncertainty.
• S&P Global Ratings expects the tariffs to increase volatility, signaling greater disruptions and uncertainty in global trade and a new layer of supply chain pressures. This can cause input shortages, delivery delays, rising costs, and inventory buildup--leading to further cash-flow disruptions and higher leverage.

10. Supply-Chain Risk Trends – A Credit Perspective Update, April 23, 2025

• As supply-chain risks have abated from their highs during the COVID pandemic, so too have supply-chain-related negative rating actions.
• The consumer products, capital goods/machines, and equipment sectors make up 45% of the ratings that were affected by supply-chain problems since 2020.
• Key supply-chain uncertainties include new global trade tariffs and trade protectionism, volatility from geopolitical rivalry and conflict, and lingering disruptions. While the effects of these uncertainties are difficult to predict, they will likely impact at some point the economics of established supply-chains and could affect creditworthiness.

11. Industry Credit Outlook: Tariffs cloud corporate earnings, March 20, 2025

• The Q4 earnings season concluded against the backdrop of intense tariff-related anxiety. Uncertainty around the timing, scope, and duration of U.S. tariffs and retaliatory measures from other countries makes it difficult for companies to assess potential impacts. Against this backdrop, earnings calls comments represent a broad, if imperfect, survey of corporate sentiment regarding tariff-related risks.
• We have assessed comments from 533 rated companies globally with total revenues exceeding $10 trillion.
• Corporate guidance largely does not reflect tariff impacts, so worst case outcomes will cause substantial earnings revisions. Companies appear broadly sanguine and believe price increases, supply chain localization, and inventory movement will soften the blow.
• This round of tariff conflict is best understood as a third wave of supply chain volatility following U.S. tariff measures in 2018 and the COVID-19 pandemic. Many companies, particularly in the U.S., have localized supply chains and lowered exposure to China.
• The greatest risks are likely in sectors with deep supply chain integration across North America, such as autos and aerospace. Some raw material exposures are large enough as to make tariffs difficult to avoid without exemptions.
• The near universal intent to pass through higher tariffs via prices means either inflation will result or, if the pricing environment is more resistant, corporate profit margins will begin to feel pressured.

12. GCC Companies Brace For A Storm: Impact Of Trade Tensions And Weaker Oil Prices, April 29, 2025

• Trade tensions are threatening what have been favorable global credit conditions for most borrowers. Market volatility and increasing investor risk aversion pose the most imminent risks to credit.
• S&P Global Ratings has lowered its Brent and West Texas Intermediate (WTI) oil price assumptions by US$5 per barrel for the rest of 2025 because we believe that that the oil market could be oversupplied.
• Despite their diversification efforts, Gulf Cooperation Council (GCC) countries' economic growth remains highly correlated with oil prices.
• GCC companies will therefore probably see contagion from a decline in oil prices and a global economic slowdown rather than from the tariffs themselves.
• The outlook bias for rated GCC companies remains stable, with 61% of companies rated investment-grade.
• Nevertheless, capital expenditure (capex) requirements are high due to strong government spending and projects like Vision 2030. At the same time, refinancing needs are meaningful and geopolitical risk still looms.
• We don't expect GCC companies to remain unaffected for long, but the timing and effects of the contagion will vary by sector.

Credit trends and market liquidity

13. China Default Review 2025: Tariffs To Cap Tolerance For Big Hits, April 28, 2025

• Tolerance: A series of large distress events began with Evergrande in mid-2021. More than two years later, with Country Garden also falling into distress, and with still no end to the property crisis, systemic risk concerns rose and tolerance for big defaults fell among policymakers. Highly uncertain outlook under new U.S. tariffs will further cap tolerance for such hits.
• Re-defaults and delays: Nearly a third (30%) of defaulted onshore bonds since 2020 re-defaulted after restructuring. Macro uncertainties and the unexpectedly prolonged property crisis drove up re-defaults in 2023 and stalled restructurings in 2024. U.S. tariffs will exacerbate uncertainties, delay debt resolutions, and keep government concerns elevated.
• Central directives: As defaults and re-defaults mounted throughout 2022 and 2023 in China's bond markets, the central government issued a series of directives to prevent outright defaults, focused on state-owned enterprises.
• Offshore default rates fell to 0.5% in 2024 versus 6.5% in 2022; by amount, that's US$19 bil. from US$71 bil. Property sector default rates fell to 1.4% in 2024 from the peak of 27.8% in 2022, while non-property stayed at about 0.2%. In 1Q25, no new defaults occurred among offshore bonds of Chinese issuers.
• Onshore default rates fell to near zero in 2024, and zero in 1Q25; they had peaked at 1.2% in 2019 for non-property, and at 9.9% in 2022 for property. Policies led to two default waves (2018: overcapacity, asset management; 2021: three red lines), but now focus on preventing a third wave.
• Defaulters in 2024 increased across a number of sectors and a few provinces, but to just one case for most. The exceptions include engineering and construction (two defaulters), chemicals (two), and real estate (four), and Zhejiang (two) and Guangdong (three).

14. Global Tariff Tracker: Rating Actions As Of May 2, 2025, May 6, 2025

• Tariff-driven rating actions are limited thus far, with 11 globally as of May 2, 2025.
• Rating actions include three downgrades (one accompanied by a negative outlook), four CreditWatch negative placements, and four outlook revisions to negative.
• Actions are primarily concentrated in the consumer products (four) and retail/restaurants (three) sectors, with the remainder spread evenly across other sectors. Of the 11 issuers affected, 10 are based in the U.S., and one is from Europe.

15. This Month In Credit: Stalling Momentum?, May 1, 2025

• Net bias (positive minus negative bias) stalled at 4.9% as of March 31 after 10 months of continued increases.
• The shift in momentum is largely due to a rise in new potential downgrades, up by 70%, to the highest level of additions in the past 12 months.
• In contrast, weakest links (issuers rated 'B-' and below on either negative outlooks or CreditWatch negative) continued to decline, reaching 218--the lowest level since September 2022.
• While defaults increased to nine in March, the year-to-date count (26) tracks below first-quarter 2024 (37). We are maintaining our base-case projections for 2025, however, the longer tariff uncertainty lasts, or if it worsens, the greater the likelihood defaults move toward our pessimistic cases.

16. Global Credit Markets Update Q2 2025: Uncertainty Will Test Ratings Resilience, April 30, 2025

• Issuance volumes had a strong start in the first quarter of 2025, with some issuers of lower-rated debt extending their near-term maturities. Speculative-grade corporate maturities through to 2028 have declined 6.8% since Jan. 1, 2025.
• Debt maturities rated 'CCC/C' exceed those rated 'B-' for the remainder of 2025 and 2026, despite a smaller rated universe. This points to refinancing pressures.
• The current fixed-income market conditions are historically unusual in that they're highly contingent on a few high impact events, rather than on a downturn with more typical or widespread causes.
• First-quarter net bias trends were generally positive. North America and Europe saw modest improvements. Emerging markets was the only region to see a deterioration in net bias from the fourth quarter of 2024, with a decline of 1.1 percentage points (ppts).

17. Investment-Grade Credit Check Q2 2025: Emerging Risks, April 30, 2025

• Upgrades more than doubled last quarter, driven by utilities, financial institutions, high tech, and homebuilders/real estate.
• Looking forward the retail sector now has the lowest net bias, following a sharp increase of 3.6 ppt in negative bias combined with a large drop in negative bias from chemicals, packaging, and environmental services (-4.4 ppt).
• Rising stars (seven) outnumbered fallen angels (four) in first-quarter 2025. However, looking at issuers on the cusp of investment- and speculative-grade, potential fallen angels outnumbers rising stars by 71%.

18. Global Financing Conditions: Peak Uncertainty Leaves A Range Of Projections For Issuance, April 29, 2025

• Escalating trade tensions and very limited clarity on final tariff outcomes are heightening market volatility.
• The current fixed-income market conditions are historically unusual in that they're highly contingent on the behavior of few high-impact agents (e.g., people and/or institutions), rather than a downturn with more typical or widespread causes.
• Given these characteristics and the high unpredictability for the remainder of the year, we present a range of outcomes for our issuance projections for 2025 bond issuance.

19. Global Refinancing: Uncertain Conditions Heighten Maturity Risk, April 29, 2025

• As global trade tensions intensify, the market for corporate debt funding has rapidly changed in recent weeks, and the escalation in debt maturities through 2028 is heightening the risk of an extended period of instability.
• When financing conditions were supportive over the past year, borrowers were able to reduce near-term maturities, particularly for those maturing in the next 12 months.
• Although funding costs were largely stable in the first quarter of 2025, widening spreads and rising Treasury yields could lead to higher costs of funding.
• Much of the debt maturing this year and next was issued when rates were lower, and we estimate that borrowers with 'BBB' or 'BB' bonds in the U.S. and Europe stand to see funding costs rise, if refinanced at recent new-issue yields.

20. Default, Transition, and Recovery: 2024 Annual Global Financial Services Default And Rating Transition Study, April 24, 2025

• The financial services default count was the same as in 2023, with eight defaults in 2024. Among the eight defaults, six were from nonbank financial institutions (NBFI), one from the banking sector, and one confidential rating.
• For four consecutive years there were no defaults in the insurance sector.
• Rated financial institutions improved their credit performance compared with 2023 numbers. The downgrade-to-upgrade ratio was 0.36x compared with 0.57x in 2023, and below its median value of 1.33x for 1981-2024.

21. Default, Transition, and Recovery: Corporate Default Forecasts Maintained, But Risks Are Rising, April 25, 2025

• Recent increases in market volatility related to tariffs have raised fears for growth and higher default rates.
• We have mentioned this as a potential factor in our corporate default projections since November 2024 and included tariff-related stress in our pessimistic scenarios for the U.S. and Europe.
• A large portion of speculative-grade issuers in the U.S. and Europe are from service-based sectors, limiting their initial exposure to tariffs on goods. Threats to overall consumer spending and the macro economy are larger, if more indirect, issues for defaults ahead.
• For now, we are maintaining our base-case projections for 2025, including a 3.50% speculative-grade corporate default rate in the U.S. and 3.75% in Europe. However, the longer tariff uncertainty lasts, or if it worsens, the greater the likelihood defaults increase, moving toward our pessimistic cases (rates of 6.00% and 6.25%, respectively).

22. Default, Transition, and Recovery: 2024 Annual U.S. Public Finance Default And Rating Transition Study, May 7, 2025

• The U.S. public finance (USPF) default tally rose to eight in 2024, up from four in 2023.
• Credit quality remained positive in 2024: S&P Global Ratings raised 743 USPF ratings (42 housing and 701 nonhousing) and lowered 491 (8 housing and 483 nonhousing).
• The transportation sector continues to have dramatic improvements in credit quality, with 42 upgrades and no downgrades
• The average one-year Gini coefficient was 94% for nonhousing and 90.8% for housing, indicating that our ratings strongly reflect relative default risk.

23. Default, Transition, and Recovery: 2024 Annual U.S. Corporate Default And Rating Transition Study, April 30, 2025

• The number of rated U.S. corporate defaults increased slightly to 86 in 2024 from 82 in 2023, largely as a result of elevated distressed exchanges.
• The consumer/service sector had the highest number of defaulted issuers in 2024, with 26, while the telecommunications sector had the highest amount of defaulted debt, at $83.5 billion (including rated and not rated debt as of Jan. 1, 2024).
• Of the defaulters that were rated at the start of the year, all were speculative-grade, an improvement from the two investment-grade defaults in 2023.
• Despite the uptick in defaults, overall credit quality improved in 2024. The upgrade rate rose to 8.6% from 6.7% the previous year, while the downgrade rate fell to 6.7% from 9.3%.

Cross sector

24. Asia-Pacific Sector Roundup Q2 2025: Trade Complications Could Disturb Still Waters, March 27, 2025

• A complicated trade and macro landscape: Asia-Pacific sectors could face a complicated credit landscape amid higher trade tensions. Higher trade barriers may disrupt supply chains and slow growth. Auto, metals, pharma and technology face a direct hit from U.S. tariffs. Fears of a sharper global downturn could hit demand and confidence, squeezing the region's downstream and consumer discretionary sectors (e.g., consumer goods, gaming, and retail).
• Pressure on revenues and financing conditions: A hit to demand could erode corporate revenues, which narrows credit headroom. Banks could face lower asset quality and thereby tighten lending appetite. If risk-off sentiment intensifies, lenders may demand higher risk premia. This may upend the region's accommodative financing conditions as markets turn more volatile. Defaults may rise.
• Skewed outlook bias distribution: The net rating outlook bias improved to negative 2% as of March 2025 (Nov. 2024: negative 4%), following downgrades on New Zealand public finance issuers. The negative bias is largest for chemicals, building materials, retail, transportation cyclical, and real estate.

25. Cyber Risk Insights: Sovereigns And Their Critical Infrastructure Are Prime Targets, April 29, 2025

• The potential for political interference and economic disruption made rated sovereigns and their critical infrastructure the target of a majority of reported cyber breaches since 2000, according to data analyzed by S&P Global Ratings.
• Recent geopolitical tensions provide new impetus for attacks on sovereigns, including within the scope of hybrid warfare and to cause political unrest.
• Effectively managing sovereigns' cyber risk requires the investment of time and resources to develop public sector defenses that are robust, responsive, and adaptable to evolving threats.
• Currently, we consider it unlikely that a cyber incident might significantly or directly affect the creditworthiness of a sovereign.

26. The Credit Implications Of Tech Firms' Foray Into EVs, April 28, 2025

• We view tech firms' foray into the development of software and systems for electric vehicles, and sometimes of the actual vehicles, as high risk, high reward.
• All the firms reviewed here have the financial capacity to make this bet; we view the risks as largely to the upside, as the rewards may be substantial.
• Indicative of the newness of this venture most of the tech firms reviewed here are adopting strikingly different strategies in breaking into this market; this speaks to their different strengths and to the unknowability of which strategy will succeed.

27. Why Tech Firms Love Electric Vehicles, April 28, 2025

• Technology companies believe the growing importance of software in electric vehicles gives them an opening into carmaking, we assume.
• This opportunity is perhaps most apparent in China, where we believe tech firms will make inroads in this market.
• While we are agnostic on which model for carmaking will prevail, we believe a battle to control industry profits is playing out, with deep credit implications for the winners and losers.

28. Credit FAQ: Assessing Double-Edged Risks And Opportunities Of Data Center Development, April 24, 2025

• Data centers are increasingly becoming an integral part of global economic growth and a fundamental societal need. However, growing demand for data centers is not without its drawbacks.
• Fervent demand to advance technological innovation has enabled enormous opportunities for financing the development of the digital infrastructure that powers cloud computing and AI, among other applications.
• Private credit is taking advantage of this opportunity, emerging as a prominent financing source for data centers by providing flexible capital solutions that support the acceleration and advancement in the asset class.

29. How We Rate Data Centers Across Public And Private Markets, April 24, 2025

• Private credit is emerging as a key funding source for data center transactions.
• Our rating approach is determined by the transaction's characteristics, relying on our criteria for corporate finance, project finance, and structured finance.
• As private credit investment in data centers expands, we'll adapt our approach to rate these unique transactions.

30. Credit Cycle Indicator Q2 2025: Macro Headwinds Could Hinder Credit Recovery, March 20, 2025

• Our global credit cycle indicator (CCI) continues to signal a credit recovery this year. However, geopolitical and trade tensions, and growth concerns, amid increasing policy uncertainties, could stall or derail the upturn.
• The corporate sector, thanks to supportive market conditions, has shown stronger upward credit momentum. Households continue to grapple with squeezed purchasing power and subdued sentiment.
• The divergence across regions and geographies remains, suggesting different credit trajectories.

31. Tadawul On The Rise: Saudi Arabia's Investment Plans Fuel Growth, May 6, 2025

• The Saudi Exchange, Tadawul, is a strategic platform to attract funds to support Vision 2030 investments and is by far the largest equity market in the Middle East with its $2.7 trillion market capitalization at year-end 2024.
• That said, it remains dominated by large government-related-entity issuers and has relatively low, albeit gradually increasing, trading volumes and foreign participation compared to other major global equity markets.
• Saudi Arabia's ongoing initiatives to improve market liquidity and increase foreign shareholdings on Tadawul, such as a new investment law and pension fund reforms, should help grow portfolio inflows.
• We view the development of local equity markets as supporting credit conditions in the country because companies can diversify their funding bases and access long-term capital.

Economics

32. Global Macro Update: Seismic Shift In U.S. Trade Policy Will Slow World Growth, May 1, 2025

• A seismic and uncertain shift in U.S. trade policy has roiled markets and raised the specter of a global economic slowdown. As a result, we have updated our macro view.
• The jump in U.S. import tariffs, trading partner retaliation, ongoing concessions, and subsequent market turbulence constitute a shock to the system centered on confidence and market prices. The real economy is sure to follow, but by how much?
• We have again lowered our GDP growth forecasts for most countries and raised our inflation forecast for the U.S. We see a material slowdown in growth, but do not foresee a U.S. recession at this juncture.
• The risks to our baseline remain firmly on the downside in the form of a stronger-than-anticipated spillover from the tariff shock to the real economy. The longer-term configuration of the global economy, including the role of the U.S., is also less certain.

33. My Washington Week - Spring 2025: U.S. Tariffs And The Global Economic Order Dominated Discussions, April 24, 2025

• Tariff policy uncertainty is causing the economy to freeze. Firms are pausing investments, consumers are pausing discretionary purchases, and market players are pausing deals.
• Globalization is not dead just because U.S. appears to be opting out. Europe and China are doubling down on globalization as it is the best way to continue on the path to greater prosperity.
• Europe's reawakening is evident through higher investment in infrastructure and defense, with Germany leading the way.
• U.S. administration supports Bretton Woods institutions, i.e. IMF and World Bank, and underscored their importance to global prosperity.
• Security and sustainability are the two other relevant topics albeit less prominently on display than in previous years.

34. U.S. Economic Outlook Update: Higher Tariffs And Policy Uncertainty To Weaken Growth, May 1, 2025

• A working assumption of sharply higher U.S. average effective tariff on imported goods as well as the persistent unpredictability of policy have led us to update our U.S. macroeconomic forecasts.
• According to our new baseline forecast, the U.S. economy will expand 1.5% and 1.7% on an annual average basis in 2025 and 2026, respectively, (down from 1.9% in our March forecast), with domestic demand (GDP excluding net exports) growing at a less than 1% annualized pace for the rest of this year.
• The tariff-induced price shock would raise core consumer price inflation to 4.0% by the end of this year, while lower oil price assumption should put a lid on headline inflation at 3.5%.
• The unemployment rate will drift higher as weaker growth takes hold, potentially peaking at 4.7% in the first half of next year, despite curbs on immigration and a rise in deportations slowing labor force growth.
• We anticipate the Federal Reserve to ease by 50 basis points in the final quarter of 2025, when greater downside risk to employment begins to outweigh the upside risks to its inflation outlook.

Environmental, social, and governance

35. Sustainable Finance Newsletter Q1 2025, April 29, 2025

• In first-quarter 2025 we incorporated sustainability-linked second party opinions (SOPs) to our integrated SPO analytical approach and updated our annual Sustainable Finance Spotlight report.
• Recent insights also include our inaugural "Behind the Shades" commentary on real estate and the decarbonization of oil and gas companies' activities.
• We have published our first sovereign sustainability-linked SPO (Solvenia) and our first sustainability-linked SPO with a biodiversity target (Suzano in Brazil).
• We continue publishing SPOs on low- and lower-middle income countries looking to sustainable debt markets to finance environmental and social projects.

36. Sustainability Insights | Research: Does Nature Matter To Economic Development? A Look At U.S. Local Governments, April 29, 2025

• U.S. local governments manage the relationship between land use and economic development while considering the quality of life of residents through actions such as investments in green spaces and park areas.
• Income, unemployment, urbanization, and land-use designations influence the proportion of protected land in states and cities.
• U.S. local governments typically evaluate the affordability of investing in nature, which has intangible economic value over the longer term, against more pressing needs such as housing and employment.

Financial institutions

37. China's Monetary Stimulus Adds Strain For Banks, May 8, 2025

• China's monetary stimulus is a net negative for bank margins. We think the latest cuts to key lending rates are part of an easing cycle that will stretch well into 2026.
• Guidance for lower deposit rates --to manage down fierce competition for deposits--could offset some of the pressure on lending margins for the country's banks.
• Risk management is increasingly key to mitigating the strain on banks from rising bad debt, margin compression and investment volatility.

38. Forecast Change: China's Bad Loans Likely To See Larger Tariff-Related Downside, May 7, 2025

• We now see even more potential downside to China banks due to the trade conflict with the U.S. Strains will incrementally come from micro and small enterprises (MSEs) and unsecured consumer credit.
• In our new base case, we forecast annual credit losses averaging Chinese renminbi (RMB) 2.55 trillion over 2025-2027, which assumes about 3.6% annual GDP growth over the period.
• This credit loss assumption is RMB40 billion higher than our estimate published last month. Our revisions follow lower in-house assumptions on GDP, due to the intensifying trade tensions.
• Our downside scenario has also deepened; upside is broadly the same, given China could increase stimulus and take other measures to soften the blows.

39. Why Most EMEA Emerging Markets Are Slow To Adopt Bank Recovery And Resolution Plans, May 7, 2025

• While many emerging markets were among the first adopters of international regulations on capital and liquidity, most of them are still dragging on the implementation of a resolution regime.
• As members of the G20, Saudi Arabia, South Africa, and Turkiye have endorsed the resolution standards but only South Africa made it to the finish line.
• Reluctance to adopt resolution regimes could be due to concerns that it would undermine confidence in government support for banks. It could also be due to the narrow local capital markets and limited access to international capital markets and the higher costs for banks. Finally, it could be simply related to the low sophistication of the institutional frameworks in many emerging markets.
• We therefore expect adoption of resolution regimes in many of EMEA's emerging market countries will take a long time.

40. LatAm Financial Institutions Monitor Q2 2025: Adapting To Market Volatility And Economic Shifts, April 24, 2025

• Global financial institutions are facing increased market volatility, which heightens counterparty risk and could expose vulnerabilities across financial systems.
• Escalating trade tensions may undermine business and consumer confidence, reducing corporate investment, credit demand, and potentially, banks' profits.
• We expect Mexican banks to take cautious growth strategies due to uncertainties over U.S. tariffs. Credit expansion may slow, and asset quality could decline but remain manageable.
• Brazil's persistently high interest rates will erode banks' asset quality metrics. Brazilian banks face challenges in implementing new regulatory measures, including a new methodology for determining provisions for credit losses.
• Credit growth in Chile will likely remain low due to weak corporate demand and election uncertainty, putting pressure on margins and profitability.
• Demand for credit in Colombia is recovering at a slow pace, leading to sluggish credit growth and a slower-than-anticipated recovery in asset quality.
• Peru's complex political landscape is likely to persist, but conditions are gradually improving, supported by economic growth, decreasing inflation, and lower interest rates.

41. Saudi Banks Can Manage Their External Debt Spike, April 30, 2025

• Saudi banks are increasingly turning to external funding to maintain rapid lending growth and to cater to the financing demands of Vision 2030.
• That external funding is mostly short-term, in the form of interbank and nonresident deposits, but also includes long-term issuance on international capital markets.
• Risk, in the short term, appears under control, despite recent market turbulence. However, greater reliance on external funding warrants attention given the potential for long-term vulnerabilities.

Infrastructure

42. Asian Ports To Face Their Stiffest Test, April 28, 2025

• U.S. tariffs mean Asian ports, especially those in China, may be facing their biggest abrupt decline in throughput in their operating history.
• S&P Global Ratings stress tests show rated Asian port operators have headroom to absorb demand risks in 2025.
• If the tariffs persist beyond two years without mitigation or other growth drivers, it will squeeze operators' revenues and financial leverage.

43. European Infrastructure Companies Are Showing Resilience Amid U.S. Tariff Uncertainty, April 29, 2025

• Our rated European infrastructure portfolio should remain resilient to U.S. tariffs, which are having only a limited direct influence. This resilience reflects strong business models and competitive positions.
• But weaker macroeconomic prospects, higher inflation and borrowing costs, or lower liquidity could erode rating headroom.
• For Europe-based utilities, their U.S. grids face minimal tariff-related exposure. Offshore wind is the most vulnerable, with onshore-renewables developers somewhat exposed to tariffs and any changes to the Inflation Reduction Act's tax credits.
• Performance-wise, transportation infrastructure companies are closely tied to macroeconomic developments in their catchments. Regulatory frameworks and quasi-monopolistic positions will help transportation infrastructure and regulated utilities mitigate this.
• Tariffs will likely have a minimal direct impact on digital infrastructure companies. Negative indirect effects could stem from depressed macroeconomic conditions, while national regulators' heavier focus on domestic investment could create selected opportunities.

44. Heathrow's Expansion Could Impair Its Credit Profile, April 28, 2025

• The expansion of London's five airports is back on the U.K. government's agenda and may increase the capital's overall airport capacity to more than 300 million passengers per year from 180 million currently.
• Adding a third runway at Heathrow would require the airport to take on a huge amount of debt. This would increase Heathrow's already significant leverage and most likely give rise to a major step-up in aeronautical charges.
• The step-up in charges, together with planned large capacity additions at other London airports that will likely materialize before the completion of Heathrow's expansion, could weigh on Heathrow's competitive position.
• The combined effect could be credit negative for Heathrow, although the degree of rating impact would depend on the airport's financial prudence, regulatory protections, and aviation reform.

45. U.S. Renewable Power Sector Update: Solar Developers Shine On Through Hazy China, May 5, 2025

• For solar panels, Chinese production is largely irrelevant because U.S. developers have shifted imports away from China .
• Southeast Asian reliance for panel imports is significant but we expect dependance to decline if current tariffs stand.
• Despite lower exposure to The Association of Southeast Asian Nations (ASEAN) countries, we expect solar power purchase agreements (PPA) prices to rise.
• U.S. prices are significantly higher, and U.S. domestic panel manufacturers are likely not sharing 45x credit benefits with developers.
• We expect battery deployment could decrease if current tariff proposals are imposed
• Common strategies used to mitigate tariff risks include safe harboring requirements through 2026, diversifying the supply chain out of Southeast Asia, and using domestic suppliers.

Insurance

46. Asia-Pacific Insurance Mid-Year Outlook 2025: Strong Capital Buffers Dampen Tariff-Driven Market Volatility, May 6, 2025

• Insurers face a new set of potential macro-financial shocks, triggered by escalating trade tensions. S&P Global Ratings believes the ripple effects will be wide but uneven.
• Asia-Pacific insurers enter these tougher credit conditions from a position of strength, with solid capital adequacy and stable credit fundamentals.
• Our base case is for ratings stability in 2025. Various factors could nevertheless affect insurers. These include fluctuations in investment valuations; forex market volatility; supply-chain disruptions affecting property/casualty lines, and slower economic growth, which may dampen demand for new or renewed insurance coverage.

47. Insurance Brief: Korea Insurers To Focus On Capital Quality As Solvency Rules Evolve, May 7, 2025

• Korean insurers will continue to prioritize strengthening capital management amid easing solvency rules.
• The regulator proposes to ease its recommended capital ratios and introduce new core capital ratio requirements.
• We don't expect the reforms to affect our ratings, given the insurers' capital quality and flexibility should improve.

48. Thai Insurance Brief: Myanmar Earthquake Hit Will Be Absorbed By Reinsurers, April 24, 2025

• The Thai insurance sector is benefiting from its risk-strengthening measures.
• Over the years, many companies have increased their reinsurance coverage to safeguard against natural catastrophe losses following a major flood in Thailand in 2011.
• We believe these efforts will help cap their final losses from a recent earthquake in neighboring Myanmar that also caused damage in and around Bangkok.

Leveraged finance

49. Sector Intelligence | Leveraged Finance: U.S. And Canada Summary Report Q1 2025: Credit Quality Holds Amid Rising Uncertainty, April 24, 2025

• While the first quarter of 2025 was relatively favorable for corporate credit quality--characterized by a falling pace of defaults, robust financing conditions supporting high levels of new issuance, and an improving upgrade-to-downgrade ratio--momentum has stalled thus far in the second quarter.
• Rising trade tensions, elevated economic uncertainty, weakening business and consumer sentiment, and heightened market volatility are beginning to erode the previously favorable credit climate.
• The imposition of increased tariffs could also fuel inflation, dampen economic growth, and pressure credit quality, particularly for import-reliant or globally exposed issuers.
• Moreover, the debt markets have responded to the perceived increase in risk with higher spreads across all ratings levels. While many upper-speculative-grade issuers will benefit from the previous repricing wave that reduced their interest expense, issuers rated 'B-' and below were generally less capable of capitalizing on this trend.
• Given their limited financial flexibility to withstand a prolonged downturn, we think lower-rated borrowers are especially at risk.

50. U.S. Leveraged Finance Q1 2025 Update: Private Credit Boom Narrows Gap To BSL Market, April 24, 2025

• Stable GDP growth, rapid expansion of private credit, lower benchmark rates, and recent spread reductions have all driven recent declines in credit estimate (CE) defaults--our measure of private credit borrowers' credit quality.
• Private credit's recent boom since 2022 has improved affordable funding access for middle-market companies, cushioning them in downturns and narrowing the default gap with broadly syndicated loan (BSL) borrowers.
• Selective defaults (SDs) in CE outpaced conventional defaults 5 to 1 in 2024. Currently, 4% of the CE universe faces elevated risk, showcasing low credit assessments, tight covenant headroom, and weak interest coverage. However, we see no evidence of sponsor concentration in this most at-risk segment.
• About 2% of CEs converted interest payments partially or fully to payment in kind (PIK) in 2024, which is still modest but growing. Roughly 90% of these triggered 'SD' downgrades, and about 60% also extended maturities or deferred amortization.
• Private credit borrowers have limited direct tariff exposure due to their domestic focus, but downstream effects (including reduced consumer and business discretionary spending) pose greater risk.
• Nearly 30% of recurring revenue loans with mandatory conversion have either delayed conversion or eliminated the requirement via amendment.

Metals and mining

51. Saudi Arabia Doubles Down On Mining, April 23, 2025

• Saudi Arabia's long-term economic growth will increasingly rely on the metals and mining sector. This development is in line with the Vision 2030 program, which aims to reduce the country's oil dependency.
• The metals and mining sector benefits from the introduction of the Mining Investment Law, digital licensing platforms, and increasing global and domestic demand.
• That said, it suffers from strict regulations, harsh operating and environmental conditions, insufficient infrastructure for large scale production, global commodity price fluctuations, and stiff global competition.

Oil and gas

52. Industry Credit Outlook: China's Oil Majors Can Cope With Lower Oil Prices And Demand, April 24, 2025

• We believe China's oil majors will moderate their production expansion on slower economic growth.
• Increasing fuel substitution for key refined products will stress downstream performance. The chemical segment will continue to stagnate due to structural supply gluts and a shaky demand recovery.
• Credit profiles will remain intact, given rating headroom for volatility in oil prices. Investment in energy transition will be neither a major financial drag nor a revenue contributor to the Chinese oil majors over the next two to three years.

53. Korean Petrochemical Companies Face A Deeper Downcycle, May 8, 2025

• Korea's petrochemical companies face at least another difficult year. Overcapacity and subdued demand will likely persist and squeeze profitability. Aggressive investments in China and the Middle East will add to excess supply.
• Broader trade uncertainty is an additional risk that will exacerbate weak demand for chemical products, leading to lower utilization rates.
• For rated entities, buffers are narrow. Downside risks to sector profitability and leverage in our base case remain elevated.

Public finance

54. China LGFVs In Transition: Shandong's Race To Reform, May 7, 2025

• Shandong is in the middle of an economic transition, which will make its state-owned enterprises (SOEs) more market focused, which we believe will be key to deleveraging.
• At the same time, Shandong's lower-tier SOEs face significant debt risks; some, or many, may not reform in time to retain the confidence of lenders.
• Shandong's credit strains are emblematic of China's wider economic transition; the changes will likely support deleveraging, but they may also be disruptive, and create fiscal fissures along the way.

55. China Local Government Brief: Coastal Provinces To Take Bigger Tariff Hits, April 25, 2025

• Tariffs will hit China's export-oriented coastal regions the hardest.
• Guangdong, Zhejiang, Jiangsu, Shanghai and Shandong are among the country's biggest provincial-level economies. They are also the biggest exporters to the U.S.
• We believe recent U.S. trade actions may strain the local economies and fiscal revenues of these local governments, stymying deleveraging efforts.

56. Changing Market Dynamics Present A Major Test For The Rated U.K. Student Accommodation Projects, April 30, 2025

• U.K.-based private build student accommodation (PBSA) projects are facing increasing market-based risks.
• Student numbers are more volatile due to tighter immigration policies and worsening affordability.
• In addition, stiffer competition from more affordable and flexible housing options is becoming increasingly evident in certain local markets.
• As a result, rating headroom has narrowed for many PBSA projects. Even after recent downgrades, 30% of the 13 rated projects in this sector have either negative outlooks or are on CreditWatch with negative implications. We plan to reassess the overall sector's credit landscape on a case-by-case basis.
• Nevertheless, U.K. higher education continues to be highly competitive internationally, and several of our rated projects focus on higher-ranking universities, where student housing demand might hold up better.

57. Credit FAQ: After The Firestorms: Credit Risks Related To U.S. Wildfires, May 5, 2025

• S&P Global Ratings continues to factor into its ratings on U.S. electric utilities the risk of liabilities from the utilities' contributing both to the ignition of wildfires as well as to related infrastructure damage.
• These risks have driven numerous rating changes and/or outlook revisions over the past several years, even considering some regulatory support for investor-owned utilities (IOUs) in California.
• S&P Global Ratings believes these risks will continue to increase due to ongoing droughts in certain regions (in part, due to climate change) that raise the susceptibility to a wildfire when high winds and an ignition source are added to the mix.

58. First 100 Days Recap: What We’re Watching For U.S. Public Finance Sectors, April 30, 2025

• The new U.S. federal administration's first 100 days in office were marked by various policy announcements that could become credit material for U.S. public finance issuers.
• We believe that if long-term credit implications arise from particular federal policy announcements, they could materialize over the next 12 to 18 months as more details unfold.
• In our view, credit pressures underpinned by tariffs or changes to federal policy are unlikely to be widespread and credit stability for U.S. public finance issuers will likely result from management's efforts to plan for and respond to the evolving macroeconomic conditions.

59. Ongoing Water Delivery Uncertainty Intensifies Credit Pressure On Utilities In The Rio Grande Basin, April 29, 2025

• On April 28, Mexico committed to increasing the U.S. share of the water supply in six of its Rio Grande tributaries through the end of the current five-year water cycle that ends in October and to collaborate with the U.S. to develop a longer-term plan to ensure supply predictability under the 1944 Water Treaty, which we view favorably.
• The announcement followed the U.S. federal administration's rejection of Mexico's request for a special allocation of Colorado River water as well as threats of tariffs and sanctions related to compliance under the 1944 treaty's water sharing terms.
• While short-term supply predictability from Mexico may be resolved, its previous failures to meet delivery targets have created credit pressure by weakening the underlying economic fundamentals and financial performance of utilities that rely on these deliveries and could contribute to ongoing challenges for utilities in the Rio Grande basin, given the water supply stress stemming from drought, aridification, increasing demand, and aging and deficient infrastructure.
• We expect longer-term solutions will likely be necessary to address the basin's supply challenges and may require greater infrastructure investment and clearer guidelines within the 1944 treaty, which we believe could improve the predictability of water deliveries, but may increase costs and strain affordability for some utilities in the region.

60. Uncertainty Clouds 2026 U.S. State Budgets, April 29, 2025

• U.S. state executive fiscal 2026 budget recommendations were proposed early in the 2025 calendar year, before several federal policy changes were announced that we believe could introduce significant uncertainty for state finances and the U.S. economy.
• The recent trend of states enacting recurring tax reductions without offsetting revenue enhancing measures has slowed but continues.
• State revenue assumptions vary wildly, and downward revisions are likely on the horizon for states with more aggressive growth forecasts.
• State balance sheets remain healthy, with rainy-day funds largely maintained near all-time highs, which could provide short-term financial relief as budget officers navigate potentially worsening financial conditions.

Real estate

61. Sector Review: Saudi Residential Real Estate Brief: Growth To Continue Despite Rising Prices, May 5, 2025

• We expect a strong pick-up in residential transaction volumes and values in 2025 in Saudi Arabia.
• Residential prices across Saudi Arabia have risen significantly thanks to financing support from the government and growing demand.
• The value of new mortgages issued by banks increased 17% to Saudi riyal (SAR) 91 billion ($24.3 billion) in 2024 fueled by the Saudi central bank cutting interest rates by 100 basis points (bps) in line with the Fed.
• Initiatives such as the government-backed Saudi Mortgage Guarantees Services Company (Dhamanat), which provides mortgage guarantees among other services, are also driving the surge in home financings for low-income Saudi citizens.

62. U.S. Retail Real Estate Investment Trust (REITs) Portfolio: How Credit Stories Have Evolved, April 24, 2025

• With 37% of retail REITs on positive outlook, we expect the positive ratings momentum to continue in 2025.
• Still, upward ratings momentum could be tempered by expectations for slower economic growth and weaker consumer spending given potential effects from recently announced tariffs. Our economist lowered the U.S. GDP growth forecast to 1.9% in 2025 and raised the risk of recession to 30%-35%.
• While retailer bankruptcies increased in recent quarters, effects on high-quality, grocery anchored portfolios were limited so far, supporting stable credit metrics.
• We expect retail REITs will continue to fund external growth in a leverage-neutral manner while maintaining S&P Global Ratings-adjusted debt to EBITDA in the current rating range.

Sovereigns

63. Ecuador Brief: Rising External Financing Needs Could Be A Challenge During President Noboa's Next Term, April 28, 2025

• Daniel Noboa won reelection earlier this month as president of Ecuador, where external financing needs and liquidity pressures are rising. Both factor into our 'B-' sovereign credit rating and negative outlook.
• The sovereign will face substantial external debt amortization starting in January 2026, amid uncertainty about its capacity to tap the global markets while investor sentiment is weak globally.
• In our view, Ecuador's debt payments this year will be manageable, given the planned fiscal consolidation and its commitment to the IMF program. That said, our negative outlook reflects risks associated with the more prominent financing requirements in 2026, as international bond principal payments increase amid uncertainty about voluntary market access to rollover payments.

64. Sovereigns Are Likely To Weather The Direct Impact Of Trade Tensions While Secondary Effects Loom, April 25, 2025

• High market volatility and uncertainty owing to trade tensions threaten the outlook for global economic growth.
• The U.S. administration's announced tariffs, if implemented, will not affect all sovereigns equally. Open economies with large exports to the U.S. could be more exposed.
• We expect most sovereigns to withstand the initial effects of tariffs in line with their current levels of creditworthiness. But secondary effects--lower economic activity and commodity prices, and elevated funding costs--could take a toll on credit quality over the next few months.
• Global geopolitical risk remains at its highest in decades and has the largest potential for disruption for sovereigns globally.

Structured finance

65. EMEA Structured Finance Chart Book: April 2025, April 25, 2025

• Analysis of historical new issue pricing for European collateralized loan obligations (CLOs) indicates that during economic shocks and subsequent recoveries, the coupon margins for investment-grade tranches at issuance are relatively more sensitive than for more junior tranches.
• Sharia-compliant mortgages are becoming increasingly common. There is also potential scope for Sharia-compliant securitizations, backed by these arrangements.
• Average total arrears in Irish reperforming loan (RPL) RMBS increased to 25.7% in December 2024 from 8.4% in January 2022, whereas prime RMBS arrears increased to only 1.1% from 0.8% over the same period.

66. CLOs' Diverse Top 30 'B-' Credits Will Face Differing Pressures In 2025, April 24, 2025

• 'B-' rated broadly syndicated loans represent 25.8% of total holdings of European collateralized loan obligations (CLOs) rated by S&P Global Ratings, while the top 30 most widely held 'B-' rated issuers represent more than a half of the 'B-' holdings of European CLOs.
• Tariffs have little direct impact on the top 30 'B-' European CLO holdings, however these credits remain susceptible to secondary effects like slowing economies, fiscal developments, and consumer confidence. Ultimately, idiosyncratic elements pertaining to each individual credit will determine the ability and willingness to service debt.
• Many of the top 'B-' rated companies have taken measures, like operational optimization and cost-cutting, to maintain their rating headroom, however, the sustainability of their highly levered capital structures remains contingent on revenue recovery in 2025.

67. Private Credit And Middle-Market CLO Quarterly: Unknown Unknowns, April 25, 2025

• We expect the tariffs to have limited primary impact on the credit-estimated companies in our rated middle-market collateralized loan obligations (CLOs) given the portfolio's concentration in service-oriented sectors like software, healthcare, and professional services.
• The first quarter saw a total of 59 credit estimate downgrades, the lowest number since the second quarter of 2023, and 55 upgrades, for a downgrade-to upgrade ratio of 1.07. In aggregate, close to 9% of credit estimates reviewed during first-quarter 2025 were lowered, while 8% of the credits reviewed were upgraded.
• The uptick in M&A and leveraged buyout (LBO) transactions and sponsor exits seen in late 2024 has reversed, and, accordingly, issuers will likely seek relief in the form of maturity extensions for loans coming due in the next 18 months or so.
• For the first quarter, close to 850 credit estimates were issued, and like last year, the ratio of new credit estimates and existing credit estimates were approximately 1:3. The uncertainty around tariffs and the impact on economic growth and inflation may lead to a moderation in the number of new credit estimates assigned in coming quarters.

68. JHF RMBS Performance Watch May 2025: Eyes On Borrower Attributes, May 8, 2025

• Rising interest rates and sustained inflation had a limited impact on the performance of mortgage loans backing JHF notes.
• We are monitoring delinquency and replacement and withdrawal rates, which have slightly increased because of changes in borrower attributes; low and stable unemployment will continue to underpin performance.
• We expect the prepayment rates to remain low while interest rates rise.

69. U.S. Auto Loan ABS Tracker: March 2025 Performance, May 7, 2025

• In March 2025, U.S. auto loan ABS performance continued to reflect normal seasonal trends, showing improvement month over month for most metrics in both the prime and subprime segments.
• For the third month in a row, prime auto loan recoveries and delinquencies improved. Prime annualized losses remained relatively flat at 69 basis points, while recoveries increased to 61.32% in March from 55.83% in February. Additionally, 60-plus-day delinquencies declined slightly, reflecting the lowest level of delinquencies we have observed over the past year. On a year-over-year basis, prime losses rose slightly, 60-plus-day delinquencies remained stable, and recoveries improved from last year.
• Subprime auto loan annualized losses decreased to 7.98% for the month from 8.71% due to higher recoveries in March. Sixty-plus-day delinquencies continued to decline in March but remained elevated compared to one year earlier. Losses remained higher than last year, due in part to recoveries declining from March 2024.
• Prime static pool performance is showing deterioration for the 2023 vintage and the first two quarters of 2024, with cumulative net losses trending higher than earlier vintages going back to 2016, but lenders took various steps to improve performance. The subprime sector's 2023 and quarterly 2024 vintages are reporting lower cumulative net losses than 2022's near-record-high levels. However, 60-plus-day delinquencies and cumulative recovery rates remain weaker than normal.
• Our April U.S. surveillance reviews resulted in 11 upgrades, no downgrades, and 66 affirmations. Of the 17 U.S. transactions reviewed, we increased our expected cumulative net loss levels for 14 transactions, decreased it for one, and maintained it for two. We also reviewed two Canadian transactions. We currently have 10 subprime subordinated classes on CreditWatch negative.

70. SF Credit Brief: U.S. CMBS Delinquency Rate Increased 59 Bps To 6.1% In April 2025; Lodging Rate Climbed To 6.67%, May 1, 2025

• The overall U.S. CMBS delinquency rate rose 59 bps month over month to 6.1% in April.
• By balance, delinquency rates increased for lodging (138 bps to 6.7%), multifamily (87 bps to 5.6%), and office (56 bps to 8.9%), and decreased for retail (68 bps to 6.1%) and industrial (10 bps to 0.5%).
• Special servicing rates rose for lodging, multifamily, retail, and industrial, and decreased for office. Meanwhile, the share of loans that were either modified or extended increased 10 bps to 8.6%.
• Our delinquency rate does not include performing matured balloon loans, which represent 129 loans (1.5% by balance).

71. SF Credit Brief: CLO Insights 2025 U.S. BSL Index: Loan Price Volatility Highlights Tariff-Affected Sectors; CLO Metrics Stable Except For Loan Prices, April 29, 2025

• Since the start of the year, downgrades across U.S. broadly syndicated loan (BSL) collateralized loan obligation (CLO) obligors have outnumbered upgrades, and 'CCC' category and non-performing exposures across reinvesting U.S. BSL CLOs have gradually increased.
• Portfolio par balances have also gradually declined during this time, leading to a modest decline in junior overcollateralization (O/C) test cushions.
• Vintage continues to play a role, as the older transactions typically have lower junior O/C test cushions as well as higher 'CCC' buckets.
• Reinvesting CLO transactions originated prior to the COVID-19 pandemic now have an average junior O/C cushion of 2.76% and average 'CCC' baskets of 7.08%, while the average values for post-pandemic transaction are 3.94% and 5.70%, respectively.
• Given the volatility in loan prices experienced in early April, junior O/C cushions of older vintage transactions may decline for CLOs, exceeding their 7.5% 'CCC' asset threshold if corporate rating downgrades continue and loan market values remain low (though they have regained some value after the first week of April).

72. Tender Option Bond Update Q1 2025: What Tariffs Mean For Muni Securitization, April 28, 2025

• $3 billion TOBs issued in Q1, up from $2.2 billion in the previous quarter. This trend is expected to continue as long-dated yields remain elevated.
• Above-average municipal new issue supply coupled with heavy outflows have driven long-dated yields to record highs.
• High-yield mutual fund sponsors drove issuance in Q1 as sponsors pursued tax loss harvesting opportunities.
• Ratings remain robust overall despite downgrades outpacing upgrades 34 to 23 in Q1, markets the third consecutive quarter of net downgrades.
• Public transportation airport bonds represented $746 million of new securitized debt in Q1 as sponsors capitalized on higher yielding AMT bond offerings.
• Unpredictability around tariffs and tax-exemptions and the impact they may have on bond prices and performance pose risks and opportunities for TOBs.

Technology

73. Tariff Uncertainty Will Weigh On U.S. Tech Credit Outlooks, April 24, 2025

• The 90-day tariff pause on key technology imports provides short-term relief to the U.S. tech industry but does not remove the uncertainty around the timing and the ultimate rates.
• S&P Global Ratings' preliminary view indicates global IT spending growth will slow to 5%-7% compared to our previous forecast of 9% in 2025, with greater effects on consumer-focused products (PCs and smartphones) than on enterprise-focused hardware (servers, storage, networking). Semiconductor demand will mirror that of the end products that use them.
• We expect revenue and margin headwinds throughout 2025 for our rated hardware and semiconductor issuers as they wrestle with tariff-induced demand destruction and margin compression.
• We have not yet taken rating actions directly related to tariff announcements because of potential mitigants within the supply chain, cushion within ratings, uncertainty around the permanence of the proposed tariffs, and the potential for a more permanent technology-specific exemption.
• We are more focused on the secondary order impact of a weakening macroeconomy. We will continue to review our rated issuers and could lower ratings on those with little to no cushion at the current ratings or those dependent on a positive operating environment to improve credit metrics.

Transportation

74. CreditWeek: As Risk Takes Flight, How Will Global Airlines Fare?, April 24, 2025

• After global air passenger traffic reached record levels last year with continued growth in leisure and increasing international travel, airline industry trends in early 2025 show a clear divergence.
• It's early days, but demand for air travel to, from, and within the U.S. appears weaker than elsewhere.
• Macroeconomic uncertainty is now being commonly cited as a key reason for recent lower-than-expected bookings—and heightened political tensions and stricter border requirements could dissuade people from travelling to and from the U.S.

75. Global Airlines Brace For Tariff Uncertainty, April 22, 2025

• Diverging trends are emerging across the global airline industry given heightened geopolitical and macroeconomic uncertainties amid intensifying trade conflicts and market volatility.
• The U.S. airline market is reporting weaker-than-expected demand trends, particularly for domestic travel, compared to other regions, and we are seeing signs that inbound air travel bookings to the U.S. are down overall.
• We think downside risks have materially increased for the wider sector as softer global economic growth could weigh on consumer confidence and cut down demand for air travel.
• Most of our rated issuers have built up a ratings buffer to withstand some pressure on earnings and cash flow this year, but we cannot rule out potential negative rating actions for airlines with tighter headroom.

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