Global credit outlook points to weaker conditions in 2027
Global credit conditions are expected to weaken as 2027 approaches, with higher financing costs and elevated energy prices increasing pressure on leveraged borrowers and sectors with heavy refinancing needs. The outlook remains uneven, as major economies keep expanding while AI investment, policy intervention and rising security-related spending widen the gap between stronger and weaker issuers.
Highlights
- Over 60% of global high-yield bonds maturing in 2027–2029 were issued in 2019–2021, and new debt prices are about 100 basis points higher.
- By 2027, U.S. hyperscaler capital expenditure may near $1 trillion, but slower growth shifts risk to leveraged developers, lenders, and structured finance vehicles.
- Increasing security premiums drive up costs for energy, minerals, and defense sectors, benefiting producers while import-dependent sovereigns and vulnerable issuers face higher refinancing pressures.
Drivers of the 2027 credit divide
As reported by Moody’s, more than 60% of global high-yield bonds maturing in 2027 through 2029 were issued in 2019 through 2021, and new debt is pricing at roughly 100 basis points above the obligations it replaces. That leaves highly leveraged companies, parts of private credit, and governments with wide deficits or short-dated debt more exposed to refinancing pressure, while banks and life insurers benefit from higher rates.Moody’s says AI transformation is also reshaping credit risk. U.S. hyperscaler capital expenditure is on course to approach $1 trillion in 2027, but growth slows and investors are expected to scrutinize returns more closely. The agency says risk is concentrated among leveraged developers, lenders and structured finance vehicles funding the build-out, while adoption creates distinct winners and losers.
Political intervention adds another layer of uncertainty. Tariffs, export controls, regulation and strategic investment can shift quickly through executive action, allowing subsidized sectors to benefit while raising costs for others.
Pressure points across sectors and sovereigns
The report says a rising security premium is increasing costs tied to energy supply, critical minerals, defense equipment and infrastructure resilience. Producers of strategic inputs stand to benefit, while import-dependent sovereigns and industries that rely on those materials face higher expenses.Issuers with long-dated debt, strong cash flow and limited exposure to energy costs or policy changes are best positioned to absorb higher costs in 2027. Moody’s does not expect a broad increase in speculative-grade default rates, but it says the weakest borrowers will find the higher-cost environment increasingly difficult to manage.
This adds to earlier discussion around sovereign borrowing risks as S&P warned that geopolitical shocks and elevated fiscal spending can strain ratings.
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