US HY Outlook 2026: More deal flow forecast with lower rates of return after three hot years
Matt Fuller - Reporter, LevFin Insights
15 December 2025
Insights into US high-yield outlook 2026, including:
- High-yield return outlook: What to expect for 2026 performance, spreads, and valuations after three strong years.
- Issuance and refinancing trends: How deal flow, refi activity, and M&A are shaping next year’s supply.
- AI and data center impact: Why advanced computing and infrastructure themes are influencing HY structures and volumes.
- Default rate trajectory: Where defaults and credit quality are headed amid an easing rate environment.
- Investor strategy takeaways: How to position for carry, potential spread widening, and macro-driven volatility.
Executive Summary
Total return forecasts for 2026 high-yield average 4.6% amid inflation worries.
Supply will expand 11% next year with lower rates supporting refi efforts and dealmaking.
AI spending boom lends new-issue prospects and innovations to structures.
Healthy returns will still be available for investors in 2026 despite a benign view toward non-investment-grade corporates after three-consecutive years of above-coupon return. Market participants forecast more business via opportunistic refinancing thanks to a lower-rates environment, an AI fundraise boom and an easier regulatory deal-making atmosphere.
Worries, however, remain for a second-consecutive year of a reignition of inflation stemming from the global trade tariffs scheme and any potential mismanagement of interest rate policy by the Federal Reserve, especially with the leadership position up for change. (Jerome Powell was appointed chair in February 2018 by President Trump but is expected to be replaced early next year.)
“I expect another range market is the most likely case, where you are running from tight spreads, like 300ish to wides of 400 to 450, and it will feel a little boring in a sense, but you are going to collect a nice carry. Compounding that, with high-yield around 7%, it is some very attractive return,” according to Matt Eagan, portfolio manager and head of the full discretion team at Loomis Sayles.
