Monthly Market Updates–August

Sources: Bloomberg; JP Morgan. As of August 31, 2025. Base Currency USD.

Global Credit

U.S. Fed Update

We start the first day of September with Fed Funds futures pricing in a 92% of a 25-basis point cut at the U.S. Fed’s FOMC September meeting. While GDP and unemployment remain constructive, new job growth continues to exhibit a declining trend.
Fed Chair Powell noted just last month that the board of governors had the luxury of time to allow more economic data to emerge before making a decision on rates. Today, all indication is that this data has been delivered in favor of a rate cut in September.
Despite the political noise surrounding President Trump’s attempted firing of Fed governor Lisa Cook, we believe the FOMC will continue to act within the lines of their dual mandate.

Overview

Global Investment Grade Credit markets produced a total return of +0.74% with a slight negative excess return of -0.04% in August. Year-to-date, total return stands at +4.68% with excess return at +1.05%. Spreads drifted 2 basis points wider to finish the period at a level of 75 basis points which continue to hover around historically tight levels.
Global Corporate Credit produced a total return of +0.75%, outperforming Global Non-Corporate Credit which produced a total return of +0.72%.
The Global Corporate Credit index finished the period with a yield to maturity of 4.39% marking a -0.37% move lower year to date.

Notable Market Moves—U.S. Credit

The Bloomberg U.S. Corporate index delivered a total return of +1.01% in August. Spreads moved 3 basis points wider over the period to finish at a spread level of 79 basis points pushing excess return to -0.08%. Spreads have now retraced back – and continue to trade lower – compared to Liberation Day levels.
We do not see a catalyst that would warrant spreads moving tighter from this point. We continue to message our belief that the market is fully priced at this level and believe the rest of 2025 will be more of a carry story. Despite this tight backdrop, demand for U.S. corporate credit remains robust given the strong trends issuer fundamentals.
The Financial sector proved to be the top performing sector over the month, delivering a total return of +1.10% and negative excess return of -0.07%. Top performing Financial industries were Financial Companies and REITs delivering total returns of +1.25% and +1.22% respectively.
The Utility sector came in second delivering a total return of +0.98% and negative excess return of -0.04% largely the result of underlying Electric and Natural Gas industry constituents.
The Industrial sector came in third, albeit only slightly, delivering a total return of +0.97% and negative excess return of -0.09%. Top performing Industrial industries were Basic Industrial and Consumer Cyclical delivering total returns of +1.09% and +1.08% respectively.
Primary markets saw $104.1 billion new issuance in gross supply, bringing year-to-date total new issuance to $1,135 billion. September is expected to be elevated given seasonal trends in the market.

Notable Market Moves—DM/EM Credit

The Bloomberg European Developed Market Corporate index delivered a total return of -0.13% in August. Spreads moved 6 basis points wider to finish the period at a spread level of 85 basis points pushing excess return to -0.01%.
Developed market Financials proved to be the most defensive sector over the period, delivering a negative total return of -0.11% and excess return of -0.01%.
Developed Market Industrials came in a close second delivering a negative total return of -0.14% and flat excess return of 0.00%.
Developed market Utilities lagged slightly, delivering a total return of -0.15% and excess return of -0.01%.
Euro issuance surprised to the upside outpacing market predictions with €44 billion coming to market in august. Spreads being near historic tights likely spurred this monthly issuance. Sterling issuance was broadly in line with £2.8 billion coming to market. Financial sterling issuance is expected to outpace non-financial issuance for the rest of the year, introducing a technical the market will have to navigate heading into the remaining months of 2025.

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