Goldman Credit Trader: Spreads Stay Tight Despite Higher Rates and Heavy AI Issuance

Resilience under the surface

Alex Finston, co-head of US and Asia credit trading in Goldman Sachs FICC and Equities, said on the firm's The Markets podcast that credit markets have been resilient throughout 2026. He described spreads as tight, with the investment-grade index roughly in the 10th percentile of a 20-year look-back and high-yield near the 25th.

Finston attributed the underlying volatility to three factors: the AI supply story, disruption from new technologies, and higher rates for longer that affect some sectors more than others. He said steady, gradual rate increases have generally been met with buying, while disorderly moves tend to cause more anxiety.

AI issuance and trade ideas

Finston said debt-market investment in AI has been substantial but well absorbed, with a large amount of capital waiting to be deployed. He described the market as increasingly favorable for credit picking, with winners and losers emerging.

He named three ideas: buying high-quality AI credits at wider yields following recent volatility, hedging portfolios while implied volatility is low, and municipal bonds. He said heightened muni supply over the past two months created a chance to buy highly rated credits, including 30-year general obligations at tax-equivalent yields approaching 10%. Those views are his, as of the recording date.

What to watch

Finston said he is watching whether the Federal Reserve retains flexibility and whether large AI deals emerge before year-end. He pointed to deal structure, duration and global financing sources, as well as whether the growth story holds. He did not indicate deals are confirmed.