In this edition of Instant Insights, our key takeaways from recent articles include the following: special updates of Asia-Pacific and North America credit conditions, U.S. tariffs' effects on North American and Korean autos, how global trade tensions affect stressed consumers, and our updated oil price assumptions. We dive into our outlooks on consumers in China and the telecom sector in the U.K., decarbonizing oil and gas production, global reinsurers, North American property and casualty insurers, the private credit market in EMEA and China, infra-REITs' role in China's social housing financing, GCC banks, and Saudi retail real estate. We also feature a credit FAQ on sovereign distressed debt exchanges and emergence from default, Ratings Performance Insights, Sharia-compliant mortgages and RMBS, Irish RMBS, as well as the fiscal trajectory, the power sector, telecom and cable companies, public finance rating activity, the CMBS market, and a sector intelligence report on corporate securitization 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. 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).

3. 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

4. China's Car Sector: A Shakeout Looms, April 1, 2025

• Beijing's push to create a giant state-owned automotive firm could jumpstart a long-awaited consolidation of China's oversupplied auto industry.
• The resulting entity, which will rank as one of the world's largest carmakers, will leverage expanded resources to improve its competitiveness in electric vehicles.
• Before the industry completes its restructuring, which we expect to play out over 2027-2030, competition will remain fierce, weighing on carmakers' volumes, margins and cash flows.

5. Korea's Automakers Have Some Buffers Against Their High Exposures To U.S. Tariffs, April 15, 2025

• The U.S.'s new 25% tariff on imported cars and auto parts will hurt the profitability of Korea's Hyundai Motor Co. Ltd. (HMC) and Kia Corp. Slightly more than 60% of their U.S. sales volume come via imports from Korea and Mexico.
• We expect HMC-Kia's strong overall profitability and solid sales performance in the U.S. will help the group manage the risks. The group has some buffer, although that will inevitably narrow.
• If the tariff stays for longer, the company's margins may be under more sustained pressure until its new U.S. plant ramps up fully. Its plan to increase local production in the U.S. via a recently opened plant in Georgia, should help mitigate the tariff risks more structurally.

6. Tariffs Take The Wheel: Higher Prices, Lower Sales, Greater Risks For The North American Auto Sector, April 14, 2025

• Prolonged tariffs on all auto imports into the U.S. along with tariffs on steel and aluminum will have a multi-billion-dollar impact on the earnings of North American automakers and suppliers.
• As a result, we expect higher vehicle prices (in the 5%-10% range) for consumers and reduced domestic demand (in the 15.2 million-15.5 million range for 2025 and 14.8 million-15.1 million range through 2026 compared to our prior estimates of 15.7 million-16.0 million), which increases the likelihood of negative ratings actions in coming quarters.
• We expect margin declines for most issuers along with high cash flow volatility in 2025 and 2026 for U.S. auto issuers, leading to credit deterioration particularly for some lower-rated auto suppliers.
• Over the next few weeks, we will further fine-tune our issuer-specific forecasts to reflect these downside risks after incorporating likely mitigating actions, most notably the sustained ability and willingness to pass through costs to the end-consumer relative to peers.

Corporates

7. Corporate Top Trends Update | Australia and New Zealand: Indirect Exposure Threatens A Delicate Recovery, March 26, 2025

• Australia and New Zealand have limited exports to the U.S., but indirect tariff effects could hit their large export sector.
• Weak Chinese demand pose risks for miners; a regional slowdown could hit ports and airports and derail the consumer and real estate recovery.
• Stabilizing office values will support REIT deleveraging; capex flexibility and bank liquidity will help infrastructure firms.

8. Corporate Top Trends Update | China: Can Stimulus Offset Slow Growth And New Tariffs?, March 24, 2025

• China has the largest U.S. trade surplus in Asia-Pacific. Its U.S. exposure has been falling, but indirect effects can hit its large export sector.
• The tariffs' impact will unfold amid tepid growth. This will weigh on China's industrial, power, transport, property, and consumer sectors.
• Government initiatives will support renewable power, transition fuels (gas), industrial metals, and metro rail, while housing sales will stabilize.

9. Most European Corporates Can Manage The Immediate Effects Of U.S. Tariffs, April 4, 2025

• S&P Global Ratings considers that European-rated corporates benefit from important mitigating factors that should enable them to manage the immediate direct impact of the Trump administration's 20% and 10% tariffs on goods from Europe and the U.K., respectively.
• We expect the European auto sector will feel the greatest negative effect, with the imposition of a 25% tariff on vehicles imported to the U.S. likely to adversely affect European and other global automakers and their extensive supply chain networks. European aluminum and steel companies, which are also subject to a 25% tariff, are also likely to be negatively affected.
• The global actions and the strategic priorities of the U.S. administration signal a significant change to the global trading environment of recent decades. An evident shift toward greater volatility and uncertainty regarding future trade developments is likely to have negative implications for corporates. That is particularly relevant for the eurozone, which relies significantly on exports.

10. 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.

11. Corporate Top Trends Update | India: Firms Protected By Growth, Funding, Credit Strength, April 1, 2025

• India's low U.S. exposure reduces tariff risks, but indirect effects, such as trade redirection to the country, could hit the steel and chemicals sectors.
• Firms are protected by robust growth and strengthened credit quality; most will fund onshore given better access to deepening liquidity onshore.
• About 30% of our outlooks on rated firms are positive while 20% are negative, driven largely by the positive sovereign outlook and the recent negative actions on the Adani group entities.

12. Corporate Top Trends Update | Indonesia: Funding At Home Eases Risks From Abroad, April 1, 2025

• Low U.S. exports limit direct risks, but indirect effects may hit Indonesia's large export sector and raise dumping risks for steel and chemical sectors.
• Risks from subdued revenue and profit growth and elevated investments to be moderated by lower refinancing needs and healthy funding conditions.
• Government policies will support the housing market and reshape the credit dynamics of the country's SOEs.

13. Corporate Japan's Hybrids: Issuers Will Keep Funding Channels Open, April 9, 2025

• Japanese corporations' hybrid securities issuance will likely remain high.
• Replacement records for hybrid securities shows Japanese corporations want to keep them on balance sheets to support creditworthiness.
• If hybrids are redeemed without replacement, we will typically consider reassessing all such remaining securities at the issuer as having no equity content; we did so in some cases in other economies.

14. Corporate Top Trends Update | Japan: Risks Ahead From Tariffs And Global Slowdown, March 25, 2025

• Tariffs would hit the operating outlook of Japanese exporters; makers of autos would be hit the hardest, followed by machinery.
• Economic slowdown in the U.S. and China may hit demand and weigh on firms' profitability; the Bank of Japan's rate hike will be manageable for most.
• Aggressive spending for growth, large acquisitions, and return to shareholders may impair the credit quality of some companies we rate.

15. Corporate Top Trends Update | South Korea: Export-Focused Economy To Face Trade Strains, March 27, 2025

• Korea's large and growing trade surplus may attract U.S. tariffs, which would hit makers of autos, industrial machinery, and semiconductors.
• Weaker U.S. support for EVs may slow sales further and pressure Korean firms in EV value chains, especially firms with aggressive U.S. investments.
• 13% of our outlooks on Korean firms are negative, none is positive. Steel firms face China supply, petrochemicals face overcapacity, both under weak demand. High-tech chips can pass-on tariff costs, helped by AI needs.

Credit trends and market liquidity

16. Ratings Performance Insights Q1 2025: A Solid Start, April 10, 2025

• Rating actions: 1. Rating performance remained resilient through the first quarter of 2025: Upgrades rose 28% while downgrades fell 18% quarter over quarter. Although they were down from the previous quarter, positive outlook and CreditWatch changes continued to exceed negative ones, signaling a net positive outlook for future rating activity.
• 2. Speculative-grade media and entertainment issuers led downgrades in the first quarter (16). Financial institutions led upgrades for the second consecutive quarter (18), and two-thirds of these were upgrades of European issuers.
• 3. Positive rating momentum was most pronounced in the U.S., where upgrades rose 30% and downgrades fell 21% from the fourth quarter of 2024. Latin America also saw strong momentum, with upgrades outnumbering downgrades in the first quarter by over 6 to 1. All other regions reported favorable upgrade-to-downgrade ratios, except for Asia-Pacific.
• Rating bias: 1. Negative bias (the percentage of issuers with negative outlooks or ratings on CreditWatch with negative implications) declined marginally in North America and Europe during the first quarter. It was roughly flat for Asia-Pacific but rose modestly for emerging markets, with the rating outlooks on four emerging market sovereigns being revised to negative because of lingering fiscal risks.
• 2. The chemicals, packaging, and environmental services sector maintained the highest negative bias, though it decreased 1.6 percentage points quarter over quarter. The largest increases in negative bias were in sovereigns (4.2 percentage points), retail and restaurants (2.6 percentage points), and forest products and building materials (2.5 percentage points).
• 3. Oil and gas issuers had the highest positive bias in the first quarter (12.2%). The automotive sector had the highest quarter-over-quarter increase in positive bias--up nearly 3.5 percentage points, to 9.0%. This is largely attributable to three positive outlook revisions in the U.S., Europe, and Asia-Pacific on two large auto manufacturers and one automotive digital marketplace provider.

17. Default, Transition, and Recovery: 2024 Annual Global Corporate Default And Rating Transition Study, March 27, 2025

• The number of global corporate defaults ticked lower in 2024, to 145 from 153 in 2023. Nearly 60% of the defaults in 2024 were distressed exchanges.
• The consumer/service sector led the global default tally for a fourth straight year, accounting for nearly 25% of defaults last year.
• Of the defaulters in 2024 that were rated at the start of the year, all but one (a confidentially rated issuer) were speculative grade, and 91.7% were rated 'CCC+' or below prior to default.
• Even though defaults were elevated, credit quality broadly improved last year. More issuers were upgraded (9.6%) than downgraded (5.8%), while the one-year global Gini ratio (a measure of ratings performance) dipped marginally by 0.8 percentage points from the previous year, to 89.4%.

18. Default, Transition, and Recovery: 2024 Annual Global Sovereign Default And Rating Transition Study, March 24, 2025

• Sovereign defaults totaled three in 2024, down from nine in 2023. Local currency defaults outnumbered foreign currency defaults for the second consecutive year.
• Overall credit quality improved in 2024, particularly for speculative-grade sovereigns. Upgrades rose by seven to 22--the highest since 2007--and downgrades remained constant at 10.
• The number of sovereigns rated 'CCC+' and below was seven as of December 2024, one less than in 2023.
• Geopolitical risks and high debt levels will be the main sources of credit quality pressure for sovereigns in 2025.

Cross sector

19. 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.

20. China Consumer Outlook: A Pressing Policy Initiative Takes Shape, April 16, 2025

• Recently announced Chinese measures to support consumer spending, while vaguely defined, will likely be meaningful for goods and services firms in the sector.
• We assume the government will roll out further details of the stimulus over the year and make adjustments to step up the program should consumer demand start to flag.
• Growth in demand for services will likely outpace that of goods for the next one-two years with consumers becoming more inclined to spend more on experiences rather than products.

21. China's Infrastructure REITs And Social Housing: A Story Of Mutual Benefits, April 16, 2025

• We expect synergies to emerge between China's social housing initiatives and the country's infrastructure REIT market.
• Introducing social housing as an asset for infra-REITs is credit positive for the originators. While issuance would dilute ownership, the operators will continue to manage the assets and fulfill policy mandates.
• Limits on rental-income adjustments are an overhang for social-housing infra-REITs. Projects in higher-tier cities have better prospects for REIT listings than those in lower-tier cities, where demand for social housing is lower.

22. EMEA Consumer Goods And Retail: U.S. Tariffs Will Hit Alcohol And Luxury Goods Hardest, April 7, 2025

• Among rated consumer goods and retail companies in Europe, the Middle East, and Africa (EMEA), alcoholic beverage and personal luxury goods companies are at most risk from U.S. tariffs.
• Most other EMEA-based rated consumer goods and retail companies operating in the U.S. will see less of a direct impact thanks to their global manufacturing footprints and generally diversified revenue streams and sourcing capabilities.
• However, the secondary effects of higher tariffs, such as lower economic growth, higher inflation, and weaker consumer confidence, could outweigh the direct primary effects and have the potential to affect a wider section of the rated consumer goods and retail companies in EMEA.
• Most companies have limited capacity to raise prices further because list prices are already high. Nevertheless, we believe that some of them will be forced to pass on at least part of the tariff impact to end consumers, exacerbating existing volume pressures.
• Most companies are starting to implement mitigating actions, but it may not be possible to change supply chains, manufacturing, and sourcing extensively enough to fully offset the negative impact on profits in the short-to-medium term.
• The rating impact depends on the companies' rating headroom, capital allocation, and the effectiveness and timeliness of their mitigating actions.

23. Financial Inclusion In Emerging And Frontier Markets: Technology Is Delivering For Banks And Societies, April 8, 2025

• Financial inclusion contributes to economic growth, poverty reduction, and societal development, making it a priority for policymakers and relevant to credit rating and risk assessment in sectors such as banks and sovereigns.
• S&P Global Ratings considers that emerging and frontier markets are poised for a decade of decisive change during which greater financial inclusion could prove to be a key driver of wealth creation and contribute to social stability.
• New technology, financial innovation, better financial literacy, prudent public policy goals, and improved affordability will be key enablers of financial inclusion, in our view.
• We consider that the extension of lending and savings products to unbanked individuals and small businesses in emerging and frontier economies could fuel significant growth in financial services and might expose providers to new credit and operational risks that must be managed.

24. 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.

25. Credit FAQ: Indonesia's Danantara: Execution Will Drive Credit Outcomes, April 8, 2025

• Indonesia's new sovereign wealth fund is not short of ambition. With circa US$900 billion in potential assets, Danantara would surpass Singapore's Temasek and Malaysia's Khazanah in size.
• We don't expect the fund's launch to have an immediate effect on Indonesia's fiscal position or the sovereign credit rating (BBB/Stable/A-2).
• We also believe the government of Indonesia remains incentivized to continue supporting its most essential state-owned entities (SOEs). Downside credit risk could materialize if mechanisms for monitoring SOE performance and providing support to these companies create timing uncertainties. Public disclosures suggest oversight mechanisms remain a work in progress.

26. CreditWeek: What Do Global Trade Tensions Mean For Already-Beleaguered Consumers?, April 10, 2025

• With the amplifying global trade struggle boosting the chance of a recession in the U.S., and Europe's economy set to slow significantly, consumers will likely tighten their purse strings.
• We think Americans will soon pull back on purchases, dealing a blow to the world's biggest economy, which is largely fueled by consumer spending.
• An unforeseen jump in unemployment could lead to further distress for consumers who are already facing a myriad of financial challenges.

Economics

27. Economic Research: Asia-Pacific Economies Likely To Be Hit By U.S. Trade Tariffs, March 26, 2025

• Our screening exercise shows that several Asia-Pacific economies could face higher U.S. tariffs under the U.S. administration's new Fair and Reciprocal Plan that targets bilateral trade surpluses, tariff differentials and other "imbalances."
• The large degree of discretion embedded in the plan makes it hard to predict the outcome. But the criteria indicate Vietnam, Taiwan, India, Japan, South Korea, and Thailand may be on the radar for U.S. trade actions.
• If imposed, tariff hikes could hit hardest for Vietnam, Taiwan, Thailand, and South Korea, based on their economic exposures to the U.S.

28. Economic Outlook Asia-Pacific Q2 2025: U.S. Tariffs Will Squeeze, Not Choke, Growth, March 26, 2025

• While U.S. tariff hikes will hit China's economy, offsetting factors keep our 2025 growth forecast unchanged at 4.1%.
• Better growth at the end of 2024 will lift China's 2025 GDP gains; this year's growth target and fiscal stimulus are more ambitious than we had expected.
• While U.S.-led trade friction will weigh on the ex-China Asia-Pacific economies, we expect domestic demand momentum to mostly remain solid, generally leading to only modest downward revisions to GDP forecasts.
• Still, as the growth outlook softens and inflation is likely to stay moderate, central bankers will increasingly be willing to risk some currency depreciation and cut policy rates.

29. Economic Outlook Canada Q2 2025: Trade Tensions Disrupt Growth Improvement, March 26, 2025

• We expect Canada's real GDP growth of 1.7% in 2025 (annual average basis), which masks a sizeable deceleration in the quarterly growth profile as the year progresses. On a fourth-quarter over fourth-quarter basis, the Canadian economy is poised to expand by 1.3% in 2025 (compared with our previous forecast of 1.8%) after expanding by 2.6% in 2024.
• The lack of visibility over U.S. trade policy is likely to delay investment decisions, with negative implications for GDP and employment in Canada. We previously expected much slower immigration and labor force growth to contribute to a decline in the unemployment rate in the second half of this year, but with hiring now likely to be weaker than we previously assumed, our new forecast is that the unemployment rate will average between 6.6% and 7.0% throughout 2025.
• We anticipate the Bank of Canada will remain on course to steadily cut rates until they reach 2.00% by the end of 2025. Concerns about risks to the rising unemployment rate are likely to outweigh temporary cost-push inflationary pressures.
• The key risk for Canada's economy hasn't changed since our last forecast update. A 25% broad-based tariff on Canadian goods from the Trump administration for the rest of the year will bring the economy closer to a recession.

30. Economic Outlook Emerging Markets Q2 2025: Trade Policy Unknowns Dampen Investment, March 25, 2025

• Lack of visibility over U.S. trade policy is likely to delay investment decisions, with negative implications for GDP in most emerging markets (EMs) this year.
• The direct impact of tariffs will be modest in most major EMs outside of Asia and Mexico.
• However, if tariffs lead to slower growth in the U.S., other major advanced economies, and China, the knock-on effects in EMs could be substantial.
• As we learn more about the specifics of U.S. trade policy, we will also better understand its impact on EMs, but we believe the risks to our growth outlook are mostly to the downside.

31. Economic Outlook Eurozone Q2 2025: A World In Limbo, March 25, 2025

• We revised our eurozone GDP growth forecast for 2025 downward to 0.9%, from 1.2% previously, due to uncertainty and U.S. tariffs. However, we expect a substantial recovery from 2026, thanks to fiscal stimulus measures in Germany and the EU. For 2026, we now forecast GDP growth of 1.4%.
• The European Central Bank (ECB) could deliver its final rate cut of the year by June, when interest rates might decline to 2.25%. We expect rate hikes as early as the second half of 2026 because fiscal stimulus programs will push growth beyond its potential.
• The economic outlook is uncertain, which is why we have included alternative scenarios for the outcome of U.S. tariffs in this publication. In a severe tariff scenario, GDP growth in the eurozone could be limited to 0.5% in 2025 and 1.2% in 2026, with the ECB cutting interest rates more than once this year and raising them later than we currently expect.
• Trade uncertainty, potential failure to execute fiscal plans, and spillovers from the U.S. economy currently dominate the balance of risks. However, positive factors could tip the balance if the positive effects from fiscal stimulus programs exceed expectations or confidence improves rapidly.

32. Economic Research: "Liberation Day" Tariff Announcements: First Take On What It Means For U.S. And Global Outlook, April 4, 2025

• The "Liberation Day" round of U.S. tariffs exceeds our expectations in both size and scope, lifting effective tariffs to levels not seen in nearly a century.
• As such, the new tariffs raise downside risks to our current macro baseline, with the ultimate near-term damage depending on how the tariff revenue is spent in the U.S. as well as the scope and type of foreign country retaliation.
• We lay out our initial directional thoughts on the impact of the new U.S. tariffs before we issue a fully revised global macro forecast next week.

33. Global Economic Outlook Q2 2025: Spike In U.S. Policy Uncertainty Dampens Growth Prospects, March 27, 2025

• Heightened U.S. policy uncertainty, mainly related to tariffs, is dominating the global macro narrative.
• Soft data such as confidence and sentiment have plunged, and U.S. market valuations have retreated. Activity and the hard data have held up so far, but all eyes are on U.S. consumption and employment.
• Our GDP growth forecasts have fallen since our previous round. This is driven by U.S. tariff effects and spillovers from a steeper decline in U.S. sequential growth. European growth is lower this year but will improve from 2026 on higher defense and infrastructure spending. China's outlook is stable.
• The risks to our baseline are firmly on the downside. We are watching the effects on demand from protracted U.S. policy uncertainty. Should these materialize, the result would be a material slowdown in growth.

34. U.K. Economic Outlook Q2 2025: Recovery In Consumption Slows As Inflationary Pressure Returns, March 25, 2025

• We have revised our expectation for U.K. economic growth down this year to 0.8% from 1.5% on the back of inflationary pressures, uncertainty over external demand, and tighter monetary policy.
• Weak export growth is set to continue as companies have seen higher input costs and a stronger currency erode their price competitiveness. The impact of tariffs on other economies is not yet clear.
• We expect the Bank of England to cut rates to 4% by the end of the third quarter, one rate cut less than in our last forecast, as it monitors the second-round effects of new inflationary pressures.
• Things are looking up for 2026, with regional growth picking up, rates cut by another 50bp, and inflation edging back to 2.5%.

35. Economic Outlook U.S. Q2 2025: Losing Steam Amid Shifting Policies, March 25, 2025

• The Trump administration's shifting policy mix is altering the economic outlook, with our assumptions reflected in a likely downshift in GDP growth to a 1.6% quarterly average in 2025. The balance of risks to our growth forecast is tilted to the downside.
• In turn, we forecast the unemployment rate will drift higher and peak at 4.6% by midyear 2026, with the public sector likely limiting payroll expansion, in contrast to significant contributions to jobs growth in the past two years.
• We project inflation will remain closer to 3.0% in 2025 as tariffs increase prices along the domestic supply chain and for end consumers.
• As a result, we expect one 25-basis-point federal funds rate cut for 2025, ending the year at 4.00%-4.25%.

Environmental, social, and governance

36. Sustainability Insights: Decarbonizing Oil And Gas Production Faces Long-Term Hurdles After Short-Term Gains, April 15, 2025

• We believe oil and gas companies can achieve their interim 2030 emissions reduction targets. A significant reduction of scope 1 and 2 emissions should be possible with existing technologies, while potentially also lowering production costs or adding to revenue.
• Emissions regulations for the industry vary across jurisdictions, and it's unclear how they might evolve. We believe the achievement of longer-term emission goals will require further technological advancement, engagement across industry and government participants, and stable and supportive policies.
• In our view, cutting emissions now will put oil and gas producers' credit profiles in a better position should carbon regulations tighten further. The sector's improved balance sheet strength over recent years should help it absorb the near-term costs of decarbonization.
• Nevertheless, oil and gas will be part of the energy system for decades to come; and though certain regulations have eased recently, we anticipate that pressure to decarbonize over the long term will remain, posing additional challenges for the sector.

37. Credit FAQ: How The Global Climate Policy Pendulum Influences Our Credit Ratings, April 10, 2025

• Recent climate policy developments point to both changing investment priorities and easing pressures to decarbonize in the U.S. and Europe. However, S&P Global Ratings doesn't believe this necessarily means less financial risk for corporate entities.
• Policies still diverge between markets, and shifts generally decrease the visibility of investments, notably for long-term projects.
• We have taken few negative credit rating actions in the past five years due to increasing pressure from decarbonization policies and don't anticipate significant positive actions stemming from potentially easing regulatory pressures.
• On the contrary, we remain cautious about how companies may react and adjust their plans. We believe climate transition is a megatrend that will shape the economic landscape over the coming decades, despite whatever short-term impacts we may see.

Financial institutions

38. China Brokerage Brief: Equity Investments Signal Increased Risk Appetite, April 9, 2025

• China's securities firms have greater exposure to market risk. Over the past year, many have rapidly increased investments in equity instruments held for non-trading purposes. Since these positions are often unhedged, firms will become more susceptible to market volatility.
• S&P Global Ratings notes this risk is still limited for rated issuers. This is despite significant volatility in equity and other markets in reaction to U.S. trade and other policy actions.

39. China's Bad Loans Could Exceed 6% In A Tariff-Related Downside, April 3, 2025

• The drag on China's economy from higher tariffs will transmit to banks. Strains will incrementally come from micro and small enterprises (MSEs) and unsecured consumer credit.
• In our base case, we forecast annual credit losses averaging Chinese renminbi (RMB) 2.5 trillion over 2025-2027, which assumes about 4% annual GDP growth over the period.
• Average annual credit losses could increase to RMB2.7 trillion in a downside scenario of tariffs hitting the economy harder; or decline from base case to RMB2.2 trillion in an upside scenario in which stimulus helps China reach its 5% growth targets.

40. European Bancassurers Are On The Offensive, April 8, 2025

• Bolstered by positive market re-pricing, European banks are increasingly turning to the bancassurance model, with organic and external growth strategies to diversify income streams.
• Owning an insurance company leads to strategic alignment within the group, control over pricing and operations, and boosts regulatory capital and return on equity, given the EU's regulatory treatment. Additionally, acquisitions can optimize the insurance subsidiary's non-fungible excess capital.
• That said, bancassurers are complex groups that require adequate risk management and compliance frameworks. In more challenging economic or capital market conditions, the correlation between life assurance and banking risks or income could increase.

41. Capital Markets Could Support Bank Revenue In 2025, But Uncertainty Due To Tariffs Is High, April 10, 2025

• Given the pickup in market volatility, we believe trading risks will be more elevated for banks this year versus last.
• Our expectation for capital markets revenue in 2025 is down 5% to up 5% versus last year, with risk to the downside given uncertainty about the economy and investment banking activity.
• Elevated market volatility should give a boost to trading revenue but market uncertainty will likely hamper investment banking results (advisory and underwriting).
• Because trading makes up a larger share of capital markets revenue than investment banking, we believe capital markets overall will continue to be a positive factor in boosting profitability.

42. GCC Banks Can Cope With The Fallout From Intensifying Trade Tensions, April 15, 2025

• While Gulf Cooperation Council (GCC) countries' direct exports to the U.S. are low, the indirect effects of the intensifying trade tensions could be significant.
• Market volatility and investor risk aversion are the most imminent threats, but banks appear capable of handling the pressure.
• A significant reduction in oil prices could impinge on government spending and economic sentiment and lead to an increase in nonperforming loans, although this is likely to affect banks' profitability rather than their solvency.

43. Debt Maturities For North American Nonbank Financial Institutions Will Remain Manageable Despite Economic Uncertainty, April 3, 2025

• Refinancing costs will likely remain elevated for U.S. and Canadian NBFIs in 2025 and 2026. Uncertainty around tariffs, together with slowing economic growth and consumption, could result in investors seeking higher premiums.
• Debt maturities at these NBFIs will continue to be manageable, even as they climb in coming years. About $20 billion in debt is set to mature in 2025; the peak year for maturities is currently 2028 (about $70 billion).
• North American NBFIs seeking to refinance their debt will likely do so in a high-interest-rate environment. This could strain operating performance and debt service coverage for certain NBFIs.

44. Taiwan Banking Update: Banks Remain Resilient Amid Uncertainty In 2025, April 10, 2025

• Taiwan's growing reliance on the U.S. economy exposes the domestic economy to higher risk of changes in U.S. policy. This could hit Taiwan households and businesses, and, in turn, banks.
• Credit losses will increase on weaker sectors of the economy amid rising economic uncertainties.
• Taiwan banks' have adequate-to-strong capital buffers to help alleviate market uncertainty.

Infrastructure

45. Smooth Renewals Will Support Brazilian Power Distributors' Credit Quality, April 7, 2025

• On Feb. 25, 2025, ANEEL approved the final renewal terms for 19 power distribution concessions expiring between 2025 and 2031.
• The updated terms exclude grant fee payments and should allow for faster recovery of investments, which we see as supportive of creditworthiness.
• On the other hand, contracts renewed under the new terms will require higher investments to meet stricter service quality requirements.
• We view the approval of the new contract terms as a critical milestone, and we believe most rated electricity groups can sustain investment in their grids while maintaining credit quality.

46. Power Sector Update: Credit Notes From The Road, April 10, 2025

• The power narrative has shifted beyond renewables and now subsumes other forms of energy.
• The demand surge narrative has turned cautious but is still tenacious.
• The ability to secure sites with grid interconnections and expertise in equipment procurement are key.
• Tightness in markets will likely keep capacity prices elevated for longer.
• We expect asset valuations to be higher and asset lives to be longer.

Insurance

47. Tariffs Put European Re/Insurance Ratings To The Test, April 9, 2025

• European reinsurers and insurers (re/insurers) brace themselves for tariff tremors.
• Due to the pronounced effect of tariffs on capital markets in the U.S., Asia, and Europe, re/insurers' investments could be more affected by tariffs than by other risks.
• Our stress test revealed that equity market stress would have the most pronounced effect on European re/insurance ratings.

48. Global Reinsurers Stand Strong Amid Investment Volatility And Natural Disasters, April 11, 2025

• The United States' announcement of tariffs has sparked capital market routs across the world, leading to increased volatility in the investment portfolios of global reinsurers.
• The global reinsurance sector is also grappling with significant natural catastrophe losses from early 2025, and the potential for further increases in claims costs.
• Despite these challenges, we believe global reinsurers remain well positioned, supported by robust capitalization and sound earnings prospects.
• Therefore, we maintain our stable sector view on the global reinsurance industry.

49. North American Property And Casualty Insurers Show Strength Under Dual Capital Pressure, April 11, 2025

• S&P Global Ratings performed a two-factor capital stress test to assess insurers' vulnerabilities and capital capacity amid volatile conditions.
• Most U.S. rated primary property and casualty (P/C) insurers show a drop of about 22.0% in total available capital (TAC) under our two-factor stress test, which considers a decline of 35% in the equity valuations and a substantial rise in catastrophe losses.
• We estimated more than half of the total of $40.4 billion in annual catastrophe budget among U.S. primary rated P/C insurers has been depleted in the first quarter.
• Equity asset and natural catastrophe risks, averaging 35.6% and 11.2% of total risk-based capital, respectively, could expose one-fourth of rated primary insurers to capital-at-risk in 2025.
• Our findings also indicate insurers with equity exposure to TAC ratio exceeding 60% are sensitive to capital movement than those susceptible to elevated natural catastrophe losses.

50. Robust Capital Supports North American Insurers Amid Market Volatility, April 10, 2025

• The announcement of sweeping tariffs by the U.S. administration as well as their temporary pause on April 9 has sparked significant turbulence in the global markets.
• Erosion of market value could have a significant impact on the insurance industry because, as the value of investments held by insurance companies declines, it can hurt their financial stability.
• Overall, however, we believe (re)insurers have better and more evolved risk management practices, including well-defined tolerance levels. In our view, insurers are well-positioned to handle the immediate impact of market downturns and have managed their portfolios amid market turbulence given their robust capital and liquidity buffers.

51. Taiwan Property & Casualty Insurance: Underwriting To Remain Satisfactory In 2025, April 9, 2025

• Taiwan property and casualty (P/C) insurers will likely maintain satisfactory underwriting performance around the historical norm and stable premium growth in 2025-2026.
• The sector recorded low double-digit premium growth in 2024 with underwriting profit back around the historical norm.
• Stable demand from auto and travel insurance will continue in 2025, but growth in commercial businesses depends on reinsurance capacity and pricing, insurers' balance between costs and risk return, and corporate clients' risk retention appetite and expense control.
• Taiwan P/C insurers should be able to manage ongoing risks such as global trade and geopolitical uncertainties, the growth of cyber insurance, and the adoption of new accounting rules in 2026.
• Solid capitalization continues to support insurers' overall credit metrics.

52. Taiwan Life Insurers Brace For Rigorous Capital Resilience Tests, April 10, 2025

• The impending implementation of a new capital-adequacy regime and insurance accounting standards will likely lead to greater capital volatility for Taiwan life insurers.
• In our view, the entities' ability to maintain a stable risk-adjusted capital buffer will be tested as they recalibrate the total adjusted capital component, recategorize bond portfolios, and revisit their dividend policies.
• Insurers will need to bolster their asset-liability management to manage the likely increase of capital sensitivity to interest rates and actuarial assumptions under IFRS 17.

Media and telecom

53. Japanese Telecoms Majors Will Retain A Data Center Edge, April 3, 2025

• Japan's telecom majors will be well positioned to remain competitive at home and abroad in the rapidly growing data center market.
• Data center business' minor profit contributions are unlikely to have a meaningful impact on companywide earnings in the next one to two years.
• Upfront investment in data centers means financial discipline will become more important for maintaining their credit quality.

54. U.K. Telecom Outlook: Consolidation In Mobile, Fragmented Fixed, And Broadly Stable Ratings, April 11, 2025

• We expect revenues in fixed services will stabilize as customers move to higher-priced fiber offerings, which will offset the decline in pay TV and fixed-voice services. Competitive pressure and its potential effect on fiber broadband average revenues per user (ARPU) remain a downside risk to our assumption.
• Significant investments in fiber by large players, such as BT and VMED--along with many smaller alternative networks (altnets)--are leading to a material fiber overbuild and are intensifying competition in the fixed wholesale market.
• Consolidation in the U.K. mobile market could stabilize competition over the long term.
• Rated integrated telecom operators face modest revenue growth prospects, which are mainly driven by growth in the mobile segment over the next few years.
• The sizable headroom of our rated integrated telecom operators provides a cushion to our ratings and gives some room to navigate a period of intensifying competition in the fixed market, along with significant capital requirements.

55. Credit FAQ: Calculating Leverage For Selected U.S. Telecommunications And Cable Companies (2025 Update), April 14, 2025

• S&P Global Ratings adjusts reported financials in our analysis of credit metrics in line with our methodologies, in part to increase comparability.
• Here, we provide the annual update to our analytical adjustments for EBITDA and debt for the five U.S. telecom companies we rate: AT&T Inc., Charter Communications Inc., Comcast Corp., T-Mobile US Inc., and Verizon Communications Inc.

56. Credit FAQ: Assessing The Credit Quality Of Large U.S. Media Companies (2025 Edition), April 1, 2025

• S&P Global Ratings adjusts reported financials in our analysis of credit metrics in line with our methodologies, in part to increase comparability.
• Here, we provide the annual update to our analytical adjustments for EBITDA, free operating cash flow (FOCF), and debt for the five major U.S. media companies we rate: Fox Corp., Netflix Inc., Paramount Global, The Walt Disney Co., and Warner Bros. Discovery Inc.

Oil and gas

57. S&P Global Ratings Lowers Its Oil Price Assumptions On Potential Oversupply; Natural Gas Price Assumptions Unchanged, April 10, 2025

• We lowered our Brent and West Texas Intermediate(WTI) oil price assumptions by US$5 per barrel for the rest of 2025 on our view that the oil market could be oversupplied.
• Our assumptions per barrel for Brent and WTI remain the same for 2026 through 2028.
• Our assumptions for Henry Hub, AECO, and TTF remain unchanged for 2025-2028.
• At this time, we don't believe there will be many rating actions directly resulting from our price deck revisions for this year.

Private markets

58. Credit FAQ: The Contraction Of China's Private Credit Market, April 15, 2025

• China's private credit market has significant structural differences from those in the U.S. and Europe. It lacks alternative investment funds and direct lending, is heavily regulated, and banks remain key players.
• We estimate the China market has shrunk to RMB21 trillion as of Dec. 31, 2024, nearly half its size since 2017. The decline comes on the back of new regulations, increased competition from local bond markets, and compressed margins.
• A combination of softening demand and disruption in supply from lenders will likely lead the overall size of the private market to further contract.

59. Private Markets Monthly (EMEA Edition), April 2025: Unique Characteristics Of European Private Credit May Better Insulate Market From Shocks, April 11, 2025

• The fragmentation of countries and separate economies under the eurozone has posed complex challenges for private credit to navigate amid the rise of the nonbank financial institution (NBFI) market. Such borrowers have tended to be small-to-midsize enterprises, thus limiting the growth of Europe's private markets.
• The region's unique characteristics imply that Europe may be better insulated from cross-sector spillover effects and the propagation of systemic risks in the event of a market shock.
• The outright size of the market is smaller, and the fragmentation of the regions' market dynamics, alongside the historical dominance of local banks, naturally erodes those linkages between banks and nonbanks.

60. Private Markets Monthly, March 2025: Identifying Potential Systemic Risks In Global Private Credit Markets, April 10, 2025

• Credit performance has so far exhibited resilience amid the global market volatility spurred by the intensifying global trade conflicts, which are likely to weaken conditions across the credit landscape.
• The prevailing certainty of uncertainty may pose particular pressures for the smaller and riskier companies that have fueled demand for private credit—especially against the backdrop of increased interconnection between banks and nonbank financial institutions.
• The state of nonbank credit providers is not a source of rating pressure for global traditional banks presently. But while relatively benign funding conditions have limited financial stability risks so far, the macro-financial shocks triggered by trade tariffs could bring on renewed turbulence.
• S&P Global Ratings will be closely monitoring potential financial stability risks throughout 2025.

61. PIK-Paying Loans Decline As A Share Of BDC Assets, April 8, 2025

• BDCs saw a modest decline in PIK-paying loans in third-quarter 2024, breaking the upward trend since second-quarter 2023.
• This decline is more notable as a share of BDC assets, which grew sharply in the third quarter, led by nontraded BDCs (including private and perpetual nontraded) at about 56% year on year.
• Among borrowers with loans held by BDCs, just 21% have loans held by five or more, but this group accounts for near 62% of BDC loan assets at fair value.
• Given macroeconomic headwinds this year, it's unclear if the decline in PIK reflects a pause, or a new downward trend.

Public finance

62. Spanish Regions Brief: After A Strong 2024, Tailwinds Will Fade, April 10, 2025

• Spanish regions improved their budgetary performance in 2024.
• Although we had anticipated this outcome, the results were stronger than we had expected in many cases. This was mostly due to continuous economic growth, including a booming real estate sector and lower investments than we had expected.
• We believe that the Spanish central government will face increasing budgetary constraints and may decide to share the burden with the sub-sovereign tier, leading to lower regional revenue growth than in recent years.

63. U.S. Public Finance Rating Activity Brief: March 2025, April 16, 2025

• There were more than 780 rating actions across USPF through March 31, 2025.
• Upgrades outpaced downgrades in the local governments, transportation, and housing sectors.
• Downgrades outpaced upgrades in the utilities, education, health care, public power, and charter schools sectors.
• Upgrades exceeded downgrades and unfavorable outlook revisions exceeded favorable outlook revisions year-to-date.

64. The U.S. Public Finance Housing Sector Could Face Credit Pressure From Federal Policy Shifts, April 3, 2025

• Affordable housing issuers that rely on federal funding could face operating pressures amid federal policy uncertainty, staffing cuts, higher tariffs, and potential appropriation reductions.
• Public housing authorities and stand-alone Section 8 properties could be the most exposed to credit pressures depending upon how evolving federal policy is implemented.
• We believe that issuers can help mitigate uncertainty through proactive management planning and financial flexibility.

Real estate

65. Australian Office Landlords To Shift Into Recovery Mode, April 7, 2025

• Stabilizing office valuations in Australian capitals indicate a potential recovery for A-REITs, unlocking access to debt and equity funding opportunities.
• Refortifying capital structures will be crucial for A-REIT stability, following two years of limited access to longer-term funding markets.
• Among the risks that S&P Global Ratings sees are redemption windows for wholesale funds and more reliance on funds management for earnings.

66. Sector Review: Saudi Retail Real Estate: Cautious Optimism In An Evolving Landscape, April 15, 2025

• Saudi Arabia's retail real estate sector is undergoing a transformation, driven by the country's Vision 2030 initiative, economic diversification efforts, and an evolving consumer landscape.
• The outlook for 2025-2026 remains optimistic, with strong demand anticipated due to factors such as population growth, increasing tourism, and changing consumer preferences.
• However, the sector is also facing challenges, including oversupply risks and evolving retail formats that could weigh on rental rates and real estate landlords' profitability amid high capital spending.
• Additionally, lower oil prices and market volatility amid escalating global trade tensions and a fragmented geopolitical environment could dampen government spending and non-oil economic growth in Saudi Arabia.

Sovereigns

67. Credit FAQ: Sovereign Distressed Debt Exchanges And Emergence From Default, April 15, 2025

• We assess debt restructurings as distressed if they meet two conditions, investors receive less than the originally promised amount; and in the absence of a debt restructuring, there is a realistic possibility of a conventional default on the debt over the medium term.
• We raise an ICR from 'SD' or 'D' if the issuer has resumed debt payments, meaning we no longer rate the debt at 'D'; or terms that were amended become legally effective and we believe the issuer will not imminently default under the new terms.

68. U.S. Fiscal Trajectory Hinges On Budget And Policy Outcomes, April 15, 2025

• The outcome of forthcoming fiscal policy negotiations--which depends on Congressional action, not executive orders--will be a key factor in our assessment of the U.S.'s fiscal profile.
• Currently, the trajectory of fiscal deficits remains unclear amid broader swings in policy, but we expect to gain clarity on tax and spending plans in the coming months, as part of the budget reconciliation process.
• This process also includes a planned increase in the debt ceiling. We expect Congress to take action to raise or suspend the debt ceiling by the needed "X-date" later this year.

Structured finance

69. EMEA RMBS And ABS Monitor Q1 2025, April 7, 2025

• During Q1 2025, rating actions were down 9% quarter-on-quarter to 144, primarily due to fewer upgrades (49, compared to 64 in the previous quarter). Affirmations increased to 86 from 82 due to new issuances from existing platforms/trusts, which led to the affirmation of the outstanding notes. Downgrades decreased to nine from 13 quarter-on-quarter. The affected tranches related to 29 transactions, representing 6% of our rated ABS and RMBS universe.
• We reviewed eight ABS and 96 RMBS transactions--23% of our total rated ABS and RMBS universe--through rating actions and our annual review surveillance process.
• The number of new transactions we rated slightly increased to 14, compared to 13 in Q4 2024. We rated four new ABS (Q4 2024: four) and 10 new RMBS (Q4 2024: nine) transactions.
• New RMBS transactions comprised mainly U.K. and Dutch assets, with ABS assets primarily from Germany.
• Rating actions mainly covered affirmations (60% of classes reviewed) and upgrades (34%). Only 6% of the rating actions we took were negative, primarily affecting classes originally rated from 'B (sf)' to 'CCC (sf)', with rating downgrades at investment-grade primarily limited to one class of notes.
• Rating action severities were 1.9 notches for downgrades and 2.7 notches for upgrades.
• Most RMBS upgrades were concentrated in U.K. transactions (44%), followed by Spain (41%), and Netherlands (12%). U.K. and Irish transactions accounted for all RMBS downgrades, all but one related to nonconforming transactions.
• We upgraded 15 ABS tranches and affirmed four tranches. No negative actions were taken on ABS transactions. Upgrades spanned multiple asset classes and jurisdictions, including auto loans and auto lease and equipment.

70. European CLO Monitor Q1 2025, April 8, 2025

• Surveillance rating activity for European CLOs was lively during Q1 2025, where we reviewed eight transactions managed by eight collateral managers.
• Rating transitions--mainly upgrades (57% of classes reviewed) and affirmations (41%)-- were positive, reflecting stable credit performance and higher credit enhancement spurred by deleveraging.
• We lowered the rating on one tranche in a transaction (2% of classes reviewed), mainly due to a reduced collateral balance and lower credit enhancement, as well as the portfolio's decreased weighted-average spread, weighted-average recoveries, and weighted-average life that reduced the excess spread available to the junior notes. The transaction is still in the reinvestment period. At closing, the class F tranche was split into class F-1 and F-2 tranches, with 'B+ (sf)' and 'B- (sf)' ratings, respectively. Following the downgrade of the F-1 tranche, both class F-1 and F-2 tranches now have the same 'B- (sf)' rating.
• Rating action severities were 2.4 notches for upgrades, 2.0 for downgrades, and 1.4 for all rating actions during the quarter.
• We reviewed 129 transactions as part of our annual review surveillance process.
• We rated 47 new broadly syndicated loan CLO transactions (including 19 resets and one refinance).
• We withdrew ratings on 167 tranches in 27 transactions, mainly due to redemptions, resets, and refinancing.

71. House Price Overvaluation Moderates For Europe's RMBS And Covered Bond Markets, April 4, 2025

• This publication has been updated to reflect S&P Global Ratings' recently revised assessment of house price overvaluation in the U.K. and Israel markets. We use our under- and overvaluation assessments for residential mortgage markets to calibrate our loss-severity assumptions for rating residential mortgage-backed securities (RMBS) and covered bonds. This publication includes assessments for other countries that were revised in January 2025; these have not been updated since then.
• Compared with our previous assessments, overvaluation in the U.K. has moderated, which we mainly attribute to wage growth, exacerbated by declining house prices in some U.K. regions. In Israel, house price growth has outstripped wage growth, which accounts for the increase in our overvaluation estimate.
• We updated our approach to determining under- and overvaluation for a specific mortgage market earlier this year. We now place each region or country in one of six categories, from undervalued to severely overvalued; these are detailed below.
• Under the updated approach, our assessments also incorporate our forward-looking view of factors we consider likely to drive income and house prices, such as interest rates and house price forecasts.

72. European CLO Margins: Shocks And Recoveries Are Guides To The Future, April 3, 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.
• The data also suggests that speculative-grade CLO tranches generally pay a spread premium relative to the underlying collateral pool, while tranches rated 'A' (or higher) generally pay a lower spread than the collateral.
• Increased competition and investor participation, reflecting CLOs' emergence as a mainstream asset class, could deliver more balanced pricing across the European CLO spectrum through 2025, though geopolitical risk could prompt CLO investors to reassess risks and put upward pressure on CLO margins.

73. Credit FAQ: ABS Frontiers: Sharia-Compliant Mortgages And RMBS Explained, April 14, 2025

• Sharia-compliant mortgages are common in Islamic finance core countries and increasingly common in other countries. There is also potential scope for Sharia-compliant securitizations, backed by these arrangements.
• There are three types of Sharia-compliant mortgages: Musharaka, Murabaha, Ijara
• Murabaha can be used to create a fixed payment plan that is predetermined at the outset and therefore is similar to a conventional fixed-rate mortgage. Ijara and musharaka payments are typically not fixed, and the overall rate payable is often based on a margin above a "rent rate." The rent rate can be reset at a frequency that is defined in the underlying contract.

74. Explaining Irish RMBS Diverging Performance, April 15, 2025

• Total arrears in Irish reperforming loan (RPL) residential mortgage-backed securities (RMBS) increased to 25.7% in December 2024 from 8.4% in January 2022, whereas prime arrears increased to 1.1% from 0.8% within the same period. The weighted-average one-month conditional prepayment rate (CPR) in Irish RPL RMBS increased to 6.0% from 4.7% over the same period, while prime CPR levels also increased to 14.9% from 6.9%.
• Within a sample of prime RMBS that we rate, 44% of borrowers refinance their mortgage before the end of their fixed rate term, while another 24% are granted a product switch to re-fix with their existing lender. For remaining borrowers, their loan rolls onto a variable rate product. Refinancing activity has increased prepayments in prime RMBS and accelerated deleveraging of their pools. RPL RMBS mainly comprise more seasoned collateral originated pre-2008, with most borrowers on variable rate mortgages.
• There appears to be no material difference in prime RMBS arrears, regardless of whether borrowers take a product switch or not. Our analysis shows 1.3% of loans which exited a fixed-rate mortgage are in arrears, compared with 1.1% that did not.

75. U.K. Post-2014 Buy-To-Let Monitor Q4 2024, April 1, 2025

• Our inaugural U.K. buy-to-let (BTL) monitor assesses the collateral performance of BTL mortgages within the RMBS transactions we rate. This report exclusively analyses first-lien loans, excluding second- or subsequent-lien BTL loans, which are covered in our "U.K. Second-Lien Monitor." Additionally, we do not include "legacy collateral," defined as loans originated before 2015.
• We examined over 75,000 loans, with a total current balance of approximately £16 billion as of Q4 2024, sourced from 87 U.K. RMBS transactions. This publication differs from our European RMBS index report as it is based on loan-level data rather than transaction data, offering enhanced granularity and deeper insights into loan performance. Specifically, this report includes any BTL loans that meet the criteria outlined in the previous paragraph. As a result, transactions that we do not classify as BTL in our European RMBS index—primarily those comprising owner-occupied loans—may still be partially represented here.
• Among these loans, 2.5% are currently in arrears (one month or more), exceeding the 0.9% reported in our Q4 2024 European RMBS Index for U.K. prime transactions.
• Our loan-level analysis reveals a correlation between loan-to-value (LTV) ratios and delinquency rates, with loans having indexed LTV ratios exceeding 80% showing higher delinquency rates compared to those with lower ratios. LTV ratios at origination have remained relatively stable over the years.
• The comprehensive dataset indicates minimal variation in arrears rates across different regions and property types. Additionally, most of the loans are being originated with a five-year fixed rate, and average loan terms have gradually increased to over 22 years. Reversion margins range from 2% to 6%, with a concentration between 4% and 5%.
• Debt service coverage ratios (DSCRs) show little regional variation, averaging a comfortable 2.0x. Rental yields are lower in and around London, while they are higher in the North of England and Scotland.
• The Appendix addresses frequently asked questions on our monitoring methodology, along with a list of transactions and their respective weightings.

76. Market Insights: Sector Intelligence | Corporate Securitization, April 14, 2025

• In 2024, S&P Global Ratings rated 11 new corporate securitization series with an aggregate issuance amount of $10.6 billion. This included five series from two new issuers: Subway Funding LLC and SEB Funding LLC (Self Esteem).
• The new issuance consisted primarily of term debt ($9.5 billion), as well as variable funding notes (approximately $1.1 billion) and liquidity reserve notes (approximately $79.0 million). Most of the proceeds ($7.7 billion, or 76%) were used to repay corporate and asset-backed debt.
• In November, we lowered our rating on TGIF Funding LLC's series 2017-1 class A-2 notes to 'CC (sf)' and removed the rating from CreditWatch negative.
• We view refinance risk as moderate due to market volatility. Only one master trust has an anticipated repayment date (ARD) in 2025: Domino's Pizza Master Issuer LLC (two series totaling $1.1 billion). However, $4.7 billion notes have ARDs in 2026, while $7.8 billion notes have ARDs in 2027.

77. U.S. CMBS Update Q1 2025: Issuance Remains Robust Amid Rising Leverage And Lingering Credit Issues, April 10, 2025

• Overall U.S. CMBS delinquency levels fell in the first quarter, though office distress remains high and multifamily delinquencies have been steadily rising.
• Market issuance was off to a very active start, especially for SASB, with total issuance doubling year over year. Leverage rose for conduits and remains elevated for SASBs.
• Our surveillance rating actions continue to trend negative, with a growing proportion affecting conduits that have more concentrated pools of loans facing challenging refinancing conditions.
• We forecast combined SASB and conduit private label issuance reaching $110 billion this year.

78. Credit FAQ: The Potential Rating Impact Of A Conservatorship Exit For Fannie Mae And Freddie Mac, April 4, 2025

• Since the new Trump administration has taken office, there has been renewed speculation about whether Fannie Mae and Freddie Mac would exit conservatorship, and how that might look. Exiting conservatorship could have ramifications for the government-sponsored enterprises (GSEs) and the U.S. mortgage market.
• S&P Global Ratings' base-case scenario is that any developments toward exiting conservatorship will not reduce the likelihood that the current senior obligations of Fannie Mae and Freddie Mac will be met. That view underpins our 'AA+/A-1+' ratings on their senior notes, which continue to have a stable outlook.
• We also believe the U.S. Treasury--which the GSEs have a preferred stock purchase agreement (PSPA) with--will seek to avoid disrupting the $14 trillion residential mortgage market.

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The Ratings View:

We published the latest "The Ratings View", which spotlights key developments and asset class trends on a weekly basis, on April 16.

This Week In Credit:

We published the latest "This Week In Credit", our data-driven research snapshot that provides forward-looking, actionable insights on weekly market-moving credit trends, on April 14.