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COMMENTS

Instant Insights: Key Takeaways From Our Research

COMMENTS

Credit FAQ: GCC GRE Ratings Benefit From Government Support

COMMENTS

European Defense Funding: What Are The Options?

COMMENTS

Default, Transition, and Recovery: Consumer Products And Health Care Led Defaults In January

COMMENTS

China Renewables Brief: Market Pricing Will Make Sector More Volatile


Instant Insights: Key Takeaways From Our Research

(Editor's Note: This research roundup features a curated compilation of the key takeaways from our most up-to-date thought leadership. This edition has been updated from the last roundup on Feb. 5, 2025.)

In this edition of Instant Insights, our key takeaways from recent articles include the following: potential macro effects of proposed U.S. tariffs, their impact on U.S. capital goods, China's auto industry, and Mexican toll roads, as well as the implications of DeepSeek on the tech sector and innovation. We dive into our liquidity outlook, global refinancing study, our global sustainable bond issuance forecast, the health-care services sector, home prices in Hong Kong, French laboratories, AI's limited influence on smartphone and PC markets, and the container and packaging industry in the U.S. We also feature changes to the sukuk structure, Taiwan money market funds, the European Annual CMBS Monitor, stablecoin regulation, the solar ABS market in Europe, Japan's securitization market, credit implications of LA wildfires on U.S. public finance and insurance issuers, and Texas schools, public pensions, and the BSL CLO index in the U.S.

For S&P Global Ratings' assumptions and credit outlook for the year on 25 corporate and infrastructure industries, please check out the newly released "Industry Credit Outlook 2025" series.

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

Instant insights article series
Sector Region/country No. Article title Publication date
Credit Conditions Global 1 Global Credit Outlook 2025: Promise And Peril 12/04/2024
Credit Conditions Global 2 CreditWeek: What Intersecting Risks Trends Are Key To Watch In 2025? 01/16/2025
Credit Conditions Asia-Pacific 3 Credit Conditions Asia-Pacific Q1 2025: Bracing For Volatility 12/03/2024
Credit Conditions Asia-Pacific 4 Credit Conditions Asia-Pacific Q1 2025: Bracing For Volatility [Slide Deck] 12/12/2024
Credit Conditions Emerging markets 5 Credit Conditions Emerging Markets Q1 2025: The Tariff Trials 12/03/2024
Credit Conditions Europe 6 Credit Conditions Europe Q1 2025: Fusion Or Fission? 12/03/2024
Credit Conditions North America 7 Credit Conditions North America Q1 2025: Policy Shifts, Rising Tensions 12/03/2024
Credit Conditions North America 8 Credit Conditions North America Q1 2025: Policy Shifts, Rising Tensions [Slide Deck] 12/12/2024
Artificial intelligence Global 9 AI Brief: DeepSeek Is A Catalyst For Innovation 02/04/2025
Artificial intelligence Global 10 AI and education: Embracing the disruption 01/29/2025
Autos China 11 Credit FAQ: Impact Of U.S. Tariffs On China's Auto Sector: Watch For Second-Order Effects 02/11/2025
Autos Japan 12 Credit FAQ: The Potential Honda-Nissan-Mitsubishi Business Integration 01/23/2025
Capital goods Japan 13 Japan's Capital Goods Industry Expanding Abroad 01/29/2025
Capital goods U.S. 14 U.S. Capital Goods Brief: Tariffs Would Test Pricing Power 02/06/2025
Chemicals Asia-Pacific 15 Asia-Pacific Chemical Sector Outlook:The Downturn Is Too Deep To Exit In 2025 01/23/2025
Consumer products China 16 China Food And Beverage: Outdoor And Leisure To Prop Up Demand 02/04/2025
Containers and packaging U.S. 17 U.S. Containers & Packaging Newsletter: New Year, New Risks For Issuers As Slow Growth Settles In 02/05/2025
Corporates Global 18 Industry Credit Outlook 2025: Compilation and Key Themes 02/04/2025
Corporates Mexico 19 A 25% Tariff Would Create New Trade Challenges For Mexican Corporations 02/04/2025
Credit trends and market liquidity Global 20 Liquidity Outlook 2025: Five Questions, Five Answers 02/05/2025
Credit trends and market liquidity Global 21 Global Refinancing: Credit Market Resurgence Helps Ease Upcoming Maturities 02/05/2025
Credit trends and market liquidity Global 22 Sukuk Brief: More Time To Adopt AAOIFI Standard 62 02/05/2025
Credit trends and market liquidity Global 23 Global Credit Markets Update | Q1 2025: Have Positive Rating Performance Trends Peaked Or Plateaued? 02/03/2025
Credit trends and market liquidity Global 24 Global Financing Conditions: A Mixed Picture As Uncertainty Builds, But The Issuance Forecast Remains Positive 01/31/2025
Credit trends and market liquidity Global 25 This Month In Credit: A Turn For The Worse? 01/31/2025
Credit trends and market liquidity Global 26 This Month In Credit: 2024 Data Companion 01/31/2025
Credit trends and market liquidity Global 27 Investment-Grade Credit Check Q1 2025: Pockets Of Pressure 01/31/2025
Credit trends and market liquidity Global 28 Investment-Grade Credit Check: Data Companion 01/31/2025
Credit trends and market liquidity Saudi Arabia 29 Saudi Capital Market Brief: Rising Issuance Levels Are Just The Start 01/22/2025
Cross sector Asia-Pacific 30 Asia-Pacific Consumer Outlook 2025: Some Pain, Some Gain 01/21/2025
Cross sector Asia-Pacific 31 Asia-Pacific Credit Outlook 2025: Cutting Through The Noise 11/13/2024
Cross sector Global 32 CreditWeek: Key Takeaways From Davos--How Will Geopolitics, AI, And Climate Risks Affect Markets? 01/30/2025
Cross sector Global 33 Credit Cycle Indicator Q1 2025: The Recovery Could Be More Elusive For Some 01/15/2025
Cross sector U.S. 34 CreditWeek: How Could U.S. Public Finance And Insurance Issuers Be Affected Post-L.A. Wildfires? 02/07/2025
Cross sector U.S. 35 The Impact Of The Los Angeles Wildfires On California's Property Insurance, Housing Finance, And State Creditworthiness 01/24/2025
Cross sector U.S. 36 CreditWeek: What Will Trump’s First 100 Days Mean For The Economy And Credit? 01/23/2025
Cross sector U.S. 37 Credit FAQ: What Are The Credit Implications Of The Los Angeles County Wildfires? 01/22/2025
Cross sector U.S. 38 U.S. Elections 2024: How Could A Second Trump Term Affect U.S. Credit? 11/07/2024
Decentralized finance Global 39 Stablecoin Regulation Gains Global Momentum 02/10/2025
Decentralized finance Global 40 Investors' Risk Awareness Increases As Stablecoins Gather Momentum 01/30/2025
Economics Asia-Pacific 41 Economic Outlook Asia-Pacific Q1 2025: U.S. Trade Shift Blurs The Horizon 11/25/2024
Economics Canada 42 Economic Outlook Canada Q1 2025: Immigration Policies Hamper Growth Expectations 11/26/2024
Economics Emerging markets 43 Economic Outlook Emerging Markets Q1 2025: Trade Uncertainty Threatens Growth 11/26/2024
Economics Europe 44 Economic Research: European Housing Markets: Better Housing Affordability Supports Recovery 01/27/2025
Economics Eurozone 45 Economic Outlook Eurozone Q1 2025: Next Year Will Be A Game Changer 11/26/2024
Economics Global 46 Economic Research: Macro Effects Of Proposed U.S. Tariffs Are Negative All-Around 02/06/2025
Economics Global 47 My Davos Week 2025: Trump and AI Dominate Discussions 01/23/2025
Economics Global 48 Global Economic Outlook Q1 2025: Buckle Up 11/27/2024
Economics U.K. 49 U.K. Economic Outlook 2025: Monetary Policy And Trade To Offset Fiscal Impetus 11/26/2024
Economics U.S., Mexico, and Canada 50 Economic Research: Which Sectors Would Be Most Vulnerable To U.S. Tariffs On Canada And Mexico? 01/30/2025
Economics U.S. 51 Economic Research: How Might Trump's Tariffs--If Fully Implemented--Affect U.S. Growth, Inflation, And Rates? 02/07/2025
Economics U.S. 52 Economic Research: Slowing Immigration Could Derail U.S. Economic Growth Momentum 01/17/2025
Economics U.S. 53 Economic Outlook U.S. Q1 2025: Steady Growth, Significant Policy Uncertainty 11/26/2024
Environmental, social and governance Europe 54 Sustainability Insights | Research: Decarbonizing European Real Estate Won't Be Easy 01/20/2025
Environmental, social and governance Global 55 Sustainability Insights: Global Sustainable Bond Issuance To Hold Steady At $1 Trillion In 2025 02/05/2025
Environmental, social and governance Global 56 Sustainability Insights: From Waste To Watts | Overview of global waste-to-energy developments 01/23/2025
Environmental, social and governance Global 57 ESG In Credit Ratings 2024 In Review: Negative Actions Outnumber Positive 7 to 1 01/21/2025
Environmental, social and governance Global 58 S&P Global's Top 10 Sustainability Trends To Watch In 2025 01/15/2025
Financial institutions Benelux 59 Benelux Banking Outlook 2025: A Story Of Resilience 01/21/2025
Financial institutions Canada 60 Canadian D-SIBs’ Outlook 2025: Strong balance sheets position D-SIBs well, but policy uncertainty 01/22/2025
Financial institutions China 61 Sector Review: China Brief: Securities Firms Await Revival In Market Sentiment 01/27/2025
Financial institutions Europe 62 The Top Trends Shaping European Bank Ratings In 2025: Solid Positions, Growing Ambitions 01/27/2025
Financial institutions France 63 French Banking Outlook 2025: Political Uncertainty Clouds The Business Climate 01/21/2025
Financial institutions Germany 64 German Banking Outlook 2025: Resilient In The Face Of Adversity 01/23/2025
Financial institutions Global 65 Financial Market Infrastructure Sector View 2025: Rocky Geopolitics, Solid Fundamentals 01/27/2025
Financial institutions Global 66 Asset Management Sector View 2025: Assets Under Management Are Growing—And So Is Complexity 01/21/2025
Financial institutions Global 67 Global Banks Outlook 2025: Cautiously Confident 11/14/2024
Financial institutions Global 68 Global Banks Country-By-Country Outlook 2025: Cautiously Confident 11/14/2024
Financial institutions Ireland 69 Irish Banking Outlook 2025: Further Progress Is Required To Sustain Momentum 01/23/2025
Financial institutions Japan 70 Japan Banking Outlook 2025: Tailwinds And Tests Of Resilience 01/30/2025
Financial institutions Nigeria 71 Nigerian Banking Outlook 2025: Resilient Performance Amid Macroeconomic Pressures 01/23/2025
Financial institutions Nordic region 72 Nordic Banking Outlook 2025: Ample Resilience Amid Lingering Uncertainty 01/24/2025
Financial institutions North African and Eastren Mediterranean 73 North African And Eastern Mediterranean Banking Outlook 2025: A Mixed Bag 02/03/2025
Financial institutions Portugal 74 Portuguese Banking Outlook 2025: On Solid Footing 01/21/2025
Financial institutions Saudi Arabia 75 Saudi Arabia Banking Sector Outlook 2025: Vision 2030 Momentum Continues 01/20/2025
Financial institutions South Africa 76 South Africa Banking Outlook 2025: Improving Economic Prospects Will Boost Banks’ Performance 01/17/2025
Financial institutions Spain 77 Spanish Banking Outlook 2025: Another Solid Year In Prospect 01/22/2025
Financial institutions Switzerland 78 Swiss Banking Outlook 2025: Strong Foundations, New Pressures 01/20/2025
Financial institutions Taiwan 79 2025 Taiwan Money Market Funds Outlook: Enhanced Credit Score Buffer Supports Stable Outlook 02/11/2025
Financial institutions U.K. 80 U.K. Banking Outlook 2025: Entering The Year With Solid Earnings And Balance Sheets 01/20/2025
Financial institutions U.S. 81 U.S. Securities Firms Outlook 2025: Uncertainty Could Cloud Otherwise Favorable Conditions 01/31/2025
Financial institutions U.S. 82 U.S. Finance Companies Are Poised To Weather An Uncertain Economy And Interest Rate Environment In 2025 01/22/2025
Financial institutions U.S. 83 U.S. Bank Outlook 2025: Entering A New Phase Under A New Administration 01/14/2025
Healthcare and pharmaceuticals Europe 84 European Health Care Services In 2025: Can Private Health Care Operators Handle Looming Budget Austerity? 01/27/2025
Healthcare and pharmaceuticals France 85 Health Care Brief: Better Earnings Visibility Revives French Laboratories' Efforts To Improve Credit Metrics 02/10/2025
Healthcare and pharmaceuticals Global 86 Health Care Services Credit Outlook Revised To Stable On Broadly Better Operating Performance 02/05/2025
Healthcare and pharmaceuticals Global 87 Pharmaceutical Industry 2025 Credit Outlook Is Stable As Healthy Revenue Growth Mitigates Pressures 02/03/2025
Infrastructure EMEA 88 EMEA Transportation Infrastructure: Handbook 2025 01/23/2025
Infrastructure Global 89 Project Finance Recovery Ratings 01/23/2025
Infrastructure Mexico 90 From Tariffs To Traffic Volumes: Potential Economic Effects On Mexican Toll Roads 02/06/2025
Insurance China 91 China Insurance Brief: Stock Directive Aligns With Life Insurers' Strategy 01/24/2025
Insurance Global 92 Reinsurance Renewals For January 2025 Show Ample Capacity Amid Elevated Catastrophes And Adverse Casualty Trends 01/30/2025
Insurance Global 93 Global Reinsurance Sector View 2025: Promising earnings prospects with an eye on U.S. casualty 01/29/2025
Insurance Global 94 Insurance Brokers And Servicers Sector View 2025: Growth Amid An Evolving Landscape 01/27/2025
Insurance Japan 95 Japan Insurers In 2025: Things Are Looking Up 01/31/2025
Insurance North America 96 North American Life Insurers Sector View 2025: Very Cautious Optimism 01/29/2025
Insurance U.S. 97 U.S. Health Insurance Sector View 2025: Elevated Earnings Risks And Health Policy Uncertainty 01/29/2025
Insurance U.S. 98 U.S. Property/Casualty Insurance Sector View 2025: Grappling With Natural Catastrophes And Rising Claims Costs 01/29/2025
Leisure and lodging Macao 99 Macao Gaming 2025 Outlook: Operators Have A Strong Hand 01/20/2025
Leveraged finance Europe 100 Market Insights: Sector Intelligence | Leveraged Finance: European Summary Report 01/30/2025
Leveraged finance U.S. 101 U.S. Leveraged Finance Q4 2024 Update: Outperforming Private Credits Thrive After BSL Transition 02/01/2025
Media and telecom Gulf Cooperation Council 102 Credit FAQ: GCC Telcos’ International Expansion: What, Why, How? 01/21/2025
Media and telecom U.S. 103 Credit FAQ: Potential Global Linear TV Network Spinoffs Face Significant Challenges Amid Secular Declines And Dis-Synergies 01/22/2025
Media and telecom U.S. 104 U.S. Advertising Forecast Remains Robust 01/22/2025
Private markets Global 105 Private Markets Monthly, January 2025: S&P Global’s Leaders On How We Serve The Scale Of Private Funding 02/01/2025
Public finance Australia 106 Australia State Ratings At Risk As Fiscal Discipline Wanes 02/04/2025
Public finance Australia 107 Subnational Government Outlook 2025: Australian States Face Budgetary Backslide 01/22/2025
Public finance Global 108 Global Ratings List: International Public Finance Entities 01/22/2025
Public finance Global 109 Subnational Government Outlook 2025: Anticipating A Year Of Change 01/16/2025
Public finance Global 110 Subnational Government Outlook 2025: Borrowings Are Still On The Rise 01/16/2025
Public finance Global 111 Subnational Government Outlook 2025: Capital Expenditure Shows Signs Of Slowing 01/16/2025
Public finance U.S. 112 Texas Schools Face Uncertain Fiscal 2026 Budget Cycle Amid Rising Costs, Stagnant State Funding 02/10/2025
Public finance U.S. 113 Three U.S. Public Pension Points To Watch In 2025 02/04/2025
Public finance U.S. 114 U.S. Public Finance 2025 Outlook: Cautiously Stable For Most Sectors While Others Are Pressured 01/30/2025
Public finance U.S. 115 Summary Of Hurricane Helene CreditWatch Resolutions For U.S. Public Finance 01/23/2025
Public finance U.S. 116 U.S. Charter Schools 2025 Outlook: Stability For Now, With Pockets Of Pressure 01/23/2025
Public finance U.S. 117 Los Angeles Wildfires Highlight Evolving Risks And Challenges For Local Governments 01/21/2025
Real estate China 118 Surging Secondary Sales To Stabilize China Property In 2025 01/22/2025
Real estate Hong Kong 119 Distress Event Could Derail Hong Kong's Home-Price Stabilization 02/06/2025
Sovereigns Africa 120 Africa Brief: CEMAC's Scarce External Financing Options Heighten Domestic Funding Uncertainty 01/29/2025
Sovereigns G7 countries 121 Credit FAQ: G7 Bond Market Developments With A Spotlight On Gilts 01/17/2025
Sovereigns Global 122 Global Sovereign Rating Trends 2025: Geopolitical Risk Is The Biggest Threat To Credit Quality 12/18/2024
Structured finance Australia and New Zealand 123 2025 Structured Finance Outlook | Australia And New Zealand: Exploring new horizons 01/22/2025
Structured finance Europe 124 European Annual CMBS Monitor 2024 02/04/2025
Structured finance Germany 125 Credit FAQ: Germany's First Solar ABS Leads The Way For Europe 02/04/2025
Structured finance Global 126 Tender Option Bond 2025 Outlook 02/03/2025
Structured finance Global 127 Structured Finance Esoteric Quarterly Roundup Q1 2025 01/27/2025
Structured finance Japan 128 Japan's 2024 Securitization Market: Issuance Returns To Growth 02/10/2025
Structured finance Latin America 129 Latin America Structured Finance Outlook 2025: Opportunities And Challenges 01/18/2025
Structured finance U.S. 130 SF Credit Brief: CLO Insights 2025 U.S. BSL Index: Exposure To 'B-' Assets Ticks Up In Q4; ‘BB’s From New Issue CLOs And Refi CLOs Compared 02/10/2025
Structured finance U.S. 131 SF Credit Brief: U.S. CMBS Delinquency Rate Increased 4 Basis Points To 5.7% In January 2025; Office Rate Drops To 9.0% 02/04/2025
Structured finance U.S. 132 Market Insights: Sector Intelligence | U.S. CLO 01/29/2025
Structured finance U.S. 133 Private Credit And Middle-Market CLO Quarterly: Waiting For The Sun Q1 2025 01/24/2025
Technology China 134 China's DeepSeek Triggers Cycle Of Disruption 02/10/2025
Technology Global 135 Why Isn't AI Shaking Up Smartphone And PC Markets? 02/06/2025
Technology U.S. 136 Seek And Deploy: How DeepSeek Is Reshaping U.S. Tech Industry's Competitive Dynamics 02/06/2025
Technology U.S. 137 Proposed Tariffs Could Hurt The Global Tech Sector If Levied Too Long 02/04/2025
Technology U.S. 138 U.S. Technology Sector: Another Attempt At A Cyclical Rebound 01/16/2025

Key Takeaways From Our Most Recent Reports

Credit conditions

1. Global Credit Outlook 2025: Promise And Peril, Dec. 4, 2024

Alexandre Birry, Paris, +44 20 7176 7108, alexandre.birry@spglobal.com

  • As economic soft landings materialize in many major economies and policy interest rates begin their descent, global credit conditions look set to remain supportive in 2025—with the caveats that there will be region- and country-specific divergence.
  • Deepening geopolitical rifts pose the biggest risk to an improving credit landscape; Donald Trump's return to the White House will have wide-ranging ramifications—with a high level of uncertainty attached to his second term, which could reignite risk-aversion among investors and affect capital flows.
  • Companies have made good progress in pushing out maturities, which has eased near-term liquidity pressure on many lower-rated borrowers, buying them time if market volatility arises and/or investors become more risk-averse.
  • We forecast a decline in defaults, albeit at a slower pace than the rise. The lowest-rated borrowers continue to face the strains of still-elevated borrowing costs, the lingering effects of permanently higher prices on consumer purchasing power, and increasing protectionism that will weigh on global trade.
  • Any improvement in global credit conditions will be along a narrow path strewn with overlapping risks. Slowing economic activity, the prospect of resurgent inflation, and political polarization could lead to sustained bouts of market volatility.

2. CreditWeek: What Are The Biggest Risks To Global Credit In 2025?, Dec. 5, 2024

Alexandre Birry, Paris, + 44 20 7176 7108, alexandre.birry@spglobal.com

  • As we look toward 2025, S&P Global Ratings sees a year of promise and peril.
  • The descent in key interest rates and resilience in many major economies may deliver on the promise of more favorable credit conditions.
  • However, intensifying geopolitical and trade tensions increase the peril present in an already tumultuous environment.

3. CreditWeek: What Intersecting Risks Trends Are Key To Watch In 2025?, Jan. 16, 2025

Alexandre Birry, Paris, + 44 20 7176 7108, alexandre.birry@spglobal.com

  • 2025 is likely to be a year of promise and peril. Easing inflation and resilient labor markets and consumer spending may deliver more favorable credit conditions. But the speed and extent of monetary policy remain in question--and trade and geopolitical tensions increase the peril present in an already tumultuous environment.
  • Ultimately, global credit conditions are likely to remain supportive this year. But any improvement will be along a narrow path strewn with overlapping risks.
  • Against this backdrop, we will be closely watching key emerging and established risks, including the direction of monetary easing and renewed focus on sovereign debt amid credit headwinds; how capital flows evolve as private credit responds to lower yields; the implications of geopolitical uncertainty on market volatility, global trade, and commodities; major economies' race to electric vehicle dominance; and the rise of data centers and AI.

4. Credit Conditions Asia-Pacific Q1 2025: Bracing For Volatility, Dec. 3, 2024

Eunice Tan, Singapore, +65-6530-6418, eunice.tan@spglobal.com

  • Trade complications. Asia-Pacific's credit landscape is set for more volatility and slower growth in 2025, amid uncertain trade and foreign policies by the incoming U.S. administration. That said, more tariffs against Chinese exports are likely. Our base case factors in a rise in the effective U.S. tariff rate on Chinese imports to 25% from 14% from the second quarter of 2025, and retaliation by China in kind. China's GDP growth could slow to 4.1% in 2025 and to 3.8% in 2026, amid limited stimulus to bolster consumption.
  • Growth at a crossroads. Countries with a large trade surplus with the U.S. (Vietnam, Thailand, Malaysia, and India) could be vulnerable to universal tariffs. To cope, Chinese producers may cut prices to stay competitive, while increasing exports to outside the U.S. The global trade slowdown could curb growth and squeeze Asia-Pacific currencies and exporters' revenues. We expect the region's growth to slip to 4.2% in 2025 and 4.1% in 2026, even as domestic consumption in emerging Asia remains supportive.
  • Financing hurdles. Geopolitical tensions complicate the credit landscape. More volatility could reverberate across capital markets, energy prices, and supply chains. Should tariffs prompt a resurgence in U.S. inflation, the Fed's monetary easing may slow. In response, Asia-Pacific central banks could keep rates high to limit outflows. A strong U.S. dollar, narrower offshore funding access, and costlier interest may strain credit further.
  • A supplementary slide deck is available here.

5. Credit Conditions Emerging Markets Q1 2025: The Tariff Trials, Dec. 3, 2024

Jose Perez Gorozpe, Madrid, +34-914-233-212, jose.perez-gorozpe@spglobal.com

  • U.S. protectionism will test credit conditions in emerging markets (EMs). Our baseline assumptions include moderate new tariffs primarily on Chinese imports. Despite potential impacts on China's economy, we anticipate that EMs' credit conditions will remain resilient, bolstered by declining interest rates, and sustained--albeit slower--economic growth.
  • The balance of risks has clearly worsened for EMs. Higher than expected tariffs on China and/or a generalized levy on U.S. imports could have ripple effects on global demand, inflation, interest rates, and currencies. These factors will likely slow EMs' economic growth, resuming inflationary pressures and worsening financing conditions, which will likely lead to a growing number of downgrades and defaults.
  • In our baseline, EM rated issuers should benefit from ongoing monetary easing, supportive financing conditions and economic activity, despite the expected slowdown. This should reflect in stable rating activity.

6. Credit Conditions Europe Q1 2025: Fusion Or Fission?, Dec. 3, 2024

Paul Watters, CFA, London, +44-20-7176-3542, paul.watters@spglobal.com

  • 2025 marks another watershed moment for Europe and the EU. If the region does not rise collectively to the challenges from increasing geopolitical instability and fails to improve economic resilience, fragmentation could increase further.
  • Regional wars and their potential effects on energy prices remain the key risk for Europe, at least over the short term. Other elevated risks that we monitor include protectionist trade policies, faltering growth, and tightening financing conditions.

7. Credit Conditions North America Q1 2025: Policy Shifts, Rising Tensions, Dec. 3, 2024

David Tesher, New York, +1-212-438-2618, david.tesher@spglobal.com

  • The potential that higher tariffs will reignite inflation and slow—or reverse—the descent in policy interest rates are key concerns for credit conditions in the region.
  • Amid the strained relationship between the U.S. and China, and the escalation in the Russia-Ukraine war, intensifying geopolitical tensions could weigh on market sentiment, investment, and capital flows.
  • Still, the U.S. economy remains resilient, and defaults look set to slow.
  • A supplementary slide deck is available here.
Artificial intelligence

8. AI Brief: DeepSeek Is A Catalyst For Innovation, Feb. 4, 2025

 Miriam Fernández, CFA, Madrid, + 34917887232, miriam.fernandez@spglobal.com

  • A new large language model (LLM) developed by Chinese startup DeepSeek promises democratization of AI access, competition to incumbents, and potential shifts in investment.
  • Innovative engineering techniques enabled the developers to use relatively cheap hardware, improve compute and energy efficiency, and offer performance comparable to existing LLMs, suggesting that AI remains prone to disruption.

9. AI and education: Embracing the disruption, Jan. 29, 2025

 Miriam Fernández, CFA, Madrid, + 34917887232, miriam.fernandez@spglobal.com

  • The adoption of AI promises to fundamentally alter the education sector in terms of the skills and talent that need to be developed, how the education system teaches, and how students learn.
  • Governments, policymakers, and institutions will need to invest and adapt to new paradigms to secure potential benefits, including improvements to educational methods and results, greater accessibility, and cost savings. Constraints, including those due to cultural resistance, funding, and regulatory regimes are likely to contribute to uneven outcomes across and within regions.
  • AI's use in education raises significant ethical questions, notably surrounding the potential for inherent and unrecognized bias in education systems and the merits of using agentic-AI systems, which offer greater responsiveness and personalization at a potential cost to individuals' privacy.
Autos

10. Credit FAQ: Impact Of U.S. Tariffs On China's Auto Sector: Watch For Second-Order Effects, Feb. 11, 2025

Claire Yuan, Hong Kong, + 852 2533 3542, Claire.Yuan@spglobal.com

  • China's fast-growing exports of autos and auto parts face one significant obstacle--tariffs.
  • S&P Global Ratings believes increased duties will only have moderate direct effects on rated Chinese car firms. The secondary effects are more unpredictable and may be more impactful for entities.
Capital goods

11. Japan's Capital Goods Industry Expanding Abroad, Jan. 29, 2025

Hiroshi Nagashima, CFA, Tokyo, (81) 3-4550-8771, hiroshi.nagashima@spglobal.com

  • Major Japanese capital goods manufacturers are accelerating overseas expansions to strengthen their competitiveness and earnings, in our view.
  • It is unlikely the gap in competitiveness and earnings with the largest foreign manufacturers will narrow in the short term.
  • We think large Japanese capital goods companies will control investments and financial burdens associated with overseas expansion.

12. U.S. Capital Goods Brief: Tariffs Would Test Pricing Power, Feb. 6, 2025

Dipak Chaudhari, CFA, Englewood, 1-303-204-9280, dipak.chaudhari@spglobal.com

  • On Feb. 1, 2025, the U.S. announced new tariffs on Canada, Mexico, and China, which account for an estimated 45% of key imported material inputs for rated U.S. capital goods firms.
  • While the situation is in flux, if enacted, the announced tariffs could increase the U.S. capital goods sector's total costs by 3%-5%, which we arrive at through the following assumptions: We assume tariffs of 25% on imports from Canada, 25% for Mexico, and an additional 10% for China (to bring the total to about 25%) for most of 2025.
  • We estimate the higher costs from these tariffs would amount to 10%-15% of EBITDA for rated U.S. capital goods companies, necessitating a break-even price increase of 2%-4% to maintain flat earnings compared to 2024.
  • However, existing price fatigue in the sector could impede firms' ability to increase prices, posing a risk for issuers with lower, speculative grade ratings. In contrast, higher-rated companies generally have more cushion following several years of cyclical upswing.
Consumer goods

13. China Food And Beverage: Outdoor And Leisure To Prop Up Demand, Feb. 4, 2025

Andy Liu, CFA, Hong Kong, + 852 2533 3554, andy.liu@spglobal.com

  • We expect overall growth in China's food and beverage (F&B) sector to slow to 5%-6% in 2025 from 8.2% in 2024. This is higher than our 2025 GDP growth forecast of 4.1%, driven by higher outdoor and leisure demand.
  • Higher U.S tariffs on China exports would have minimal direct impact on rated F&B companies, whose focus is on domestic market. Indirect hits to revenue could come from weakening employment, income and sentiment.
  • Most rated F&B and catering companies have stable outlooks. Mengniu has thinner rating buffer than that of others. We have a negative outlook on Health and Happiness (H&H), on weak demand for its products.
  • By sector: Dairy producers should see a mild contraction in revenue, with continued oversupply weighing on prices. This should end in the second half, however, allowing for a gradual recovery in margins for raw milk farmers. Elevated interest in preventive health should support momentum in the healthy drinks and supplements segments. Increasing consumption of pre-cooked food will support a stable rate of growth for packaged food. Catering sales should expand by 5%-6% in 2025. Delivery will be the main driver.
Containers and packaging

14. U.S. Containers & Packaging Newsletter: New Year, New Risks For Issuers As Slow Growth Settles In, Feb. 5, 2025

Michael Tsai, San Francisco, + 1 (212) 438 1084, michael.tsai@spglobal.com

  • Inflation has somewhat eased but pricing remains elevated, which affects demand as consumers remain prudent.
  • Inventory is returning to historical norms and packaging customers are focused on increasing sales volumes, which bodes well for the sector.
  • New emerging risks to the economy such as tariffs, consumer trends, and interest rates could have wide-reaching effects on packaging issuers leading to potential negative rating actions, particularly for the smaller, less-diversified, highly leveraged companies.
Corporates

15. Industry Credit Outlook 2025: Compilation and Key Themes, Feb. 4, 2025

Gareth Williams, London, + 44 20 7176 7226, gareth.williams@spglobal.com

  • The corporate outlook appears fundamentally healthy with broad-based growth, margins expanding, leverage falling, and interest coverage recovering.
  • Anxiety around the potential for trade and tariff conflict is widespread, given the potential risks for demand, inflation, financial market volatility, and supply chains.
  • AI, climate risks, and energy transition are the broader themes with most tangible credit risk and opportunity, given uncertain outcomes and substantial financial requirements.

16. A 25% Tariff Would Create New Trade Challenges For Mexican Corporations, Feb. 4, 2025

Alexandre P Michel, Mexico City, + 52 55 5081 4520, alexandre.michel@spglobal.com

  • After the announcement to postpone the potential 25% tariff decision on Mexico, the uncertainty will continue. Should President Trump's suggested 25% tariff become reality, we think the most exposed rated corporate sectors in Mexico would be auto suppliers, metals and mining, oil and gas, agribusiness, durable goods, and alcoholic beverages.
  • Some rated companies are somewhat insulated from a tariff shock by credit buffers, vertical integration of their U.S. operations, and the possibility of negotiating price pass-through strategies with their trading partners.
  • However, such a tariff represents a significant challenge to corporate credit quality in Mexico, and should it be enforced, we would incorporate the sector effects in our analysis.
Credit trends and market liquidity

17. Liquidity Outlook 2025: Five Questions, Five Answers, Feb. 5, 2025

Patrick Drury Byrne, Dublin, (00353) 1 568 0605, patrick.drurybyrne@spglobal.com

  • Tensions between the Fed's dual targets of maximum employment and price stability could result in higher-for-longer interest rates.
  • Net financial outflows pressure in China may weigh on the renminbi (RMB) and potentially amplify regional foreign exchange pressures.
  • New funding options and an increased role for exchange traded funds (ETFs) should bring greater liquidity to private debt markets.
  • The European Central Bank's (ECB) expectations for bank refinancing operations are not without risk for banks and the ECB itself.

18. Global Refinancing: Credit Market Resurgence Helps Ease Upcoming Maturities, Feb. 5, 2025

Evan M Gunter, Montgomery, + 1 (212) 438 6412, evan.gunter@spglobal.com

  • Resurging debt markets retain sufficient capacity to meet upcoming refinancing demands--speculative-grade bond and loan issuance last year exceeds annual maturities for each year through 2028.
  • Near-term maturities appear manageable, especially as speculative-grade obligations in 2025 fell by 50% over the past year and as investors bid up the price of 'CCC' category bonds that are maturing this year.
  • Given the uncertainties around inflation and monetary policy, the easing in financing conditions for U.S. borrowers may have stalled.
  • Borrowers with 'BBB' or 'BB' bonds in the U.S. and Europe stand to see funding costs rise by 170 bps-195 bps for those maturing in 2025 and 2026, if refinanced at recent new-issue yields.

19. Sukuk Brief: More Time To Adopt AAOIFI Standard 62, Feb. 5, 2025

Mohamed Damak, Dubai, + 97143727153, mohamed.damak@spglobal.com

  • At the beginning of February, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) held a couple of public hearings on Sharia Standard 62.
  • In S&P Global Ratings' view, this standard will shape the future of the sukuk market.
  • The AAOIFI has reiterated that the purpose of this standard is to standardize and harmonize the requirements for sukuk issuances, particularly in jurisdictions where regulators have adopted the AAOIFI's Sharia standards.

20. Global Credit Markets Update | Q1 2025: Have Positive Rating Performance Trends Peaked Or Plateaued?, Feb. 3, 2025

Patrick Drury Byrne, Dublin, (00353) 1 568 0605, patrick.drurybyrne@spglobal.com

  • Downgrade ratios rose in Q4 2024, except in emerging markets. Asia-Pacific had the sharpest sequential rise, 13%-33%. North America rose to 57% from 47% but was still down from 65% in Q4 2023. Emerging markets fell 18 percentage points to 27%. Net cumulative rating actions (upgrades less downgrades) improved in 2024 but fell in Q4 due to more downgrades, of U.S. issuers.
  • Net bias (positive less negative bias) trends were mixed. North America and emerging markets improved; Europe and Asia-Pacific fell from Q3. Emerging markets led the improvement, up 9.3 ppt year-on-year--only region to have a positive net bias reading by year end. Positive bias is highest among higher speculative-grade ratings ('BB' category), while negative bias remains concentrated among 'CCC' category and below. This implies further downward pressure at the lowest rating categories.
  • The rising stars (upgrades to investment grade) tally outpaced fallen angels (downgrades to speculative grade) in 2024 -- 33 to 19. As of Dec. 31, 2024, the count of "weakest links" fell to 241, representing a nearly 30% decrease from 309 issuers a year before. This annual decline occurred despite December seeing the first uptick in 12 months.
  • Corporate defaults finished the year at 145 in 2024, down from 153 in 2023. Up to 43% of total defaults were in media and entertainment (23 issuers), consumer products (22), and health care (18).
  • Resurgent financing conditions for both broadly syndicated loans and high yields bonds brought issuance to over $1.2 trillion, exceeding rated annual maturities through 2029. With M&A continuing to languish, refinancing was the primary reason for the surge in issuance , with borrowers taking the opportunity to lower upcoming speculative-grade maturities through 2028.

21. Global Financing Conditions: A Mixed Picture As Uncertainty Builds, But The Issuance Forecast Remains Positive, Jan. 31, 2025

Nick W Kraemer, FRM, New York, + 1 (212) 438 1698, nick.kraemer@spglobal.com

  • We expect a 3% increase in global bond issuance this year, a more modest growth rate after last year's 20% jump.
  • Because of the recent uptick in interest rates and inflation expectations, we have lowered our issuance forecasts for most sectors. But most long-term interest rates are still in the ranges that they've generally been in since mid-2023.
  • There's the potential for increased volatility this year, in our view--both positive and negative. Positive contributors could include more mergers and acquisitions, or stimulative, debt-supportive measures in China. Headwinds could include higher inflation from new tariffs, or persistently high benchmark rates.

22. This Month In Credit: A Turn For The Worse?, Jan. 31, 2025

Erik Wisentaner, London, +44-207-176-0570, erik.wisentaner@spglobal.com

  • Downgrades increased 28% in December and 23% in the fourth quarter in a negative shift toward the end of the year, pushing the trailing-three-month downgrade ratio above 50% for the first time since January 2024.
  • Downgrades were driven by an increase in investment-grade downgrades by over three times in the fourth quarter to 31 from a low of nine in the third quarter.
  • While net bias rose to its best level since November 2022, negative bias for issuers rated 'B-' and below increased for a second month in a row, in a sign the pressure may be building at the lower end of the rating spectrum.
  • Defaults remain elevated, particularly in the U.S. and Europe, which saw full-year 2024 counts exceed last year's levels despite a marginal decline at the overall global level. S&P Global Ratings Credit Research & Insights expects the global speculative grade corporate default rate to decline to 3.5% by September 2025 driven by expected declines in the U.S. and Europe.

23. Investment-Grade Credit Check Q1 2025: Pockets Of Pressure, Jan. 31, 2025

Patrick Drury Byrne, Dublin, (00353) 1 568 0605, patrick.drurybyrne@spglobal.com

  • Downgrades (led by financial institutions and utilities) increased sharply in the final quarter (to 29 from 9) leaving upgrades trailing downgrades for the first time since the fourth quarter of 2023.
  • Upgrades declined 37% in the fourth quarter to 19. The remaining upgrades were led by nine financial institutions, of which six were European based issuers.
  • The tally of seven fallen angels for the quarter was the largest quarterly increase since the third quarter of 2023, but they were still outnumbered by ten rising stars. However, potential fallen angels (34) now far outweigh potential rising stars (24), signaling a possible shift in momentum.
  • Aerospace/defense (+8.7 percentage points (ppt)) saw the largest quarterly increase in negative bias, though we note the low number of issuers in this category. Chemicals, packaging, and environmental services negative bias increased to 23.7%, ten ppt above its five-year average.
Cross sector

24. CreditWeek: Key Takeaways From Davos--How Will Geopolitics, AI, And Climate Risks Affect Markets?, Jan. 30, 2025

Yann Le Pallec, Paris, + 33144206725, yann.lepallec@spglobal.com

  • The discussion at Davos was focused firmly on the future and the increasingly interconnected risks that are reshaping the global economy and moving markets. It is clear that disruption may pose both potential promising and perilous outcomes for credit conditions.
  • The fall in policy interest rates and apparent soft landings in many major economies may deliver more favorable credit conditions, but intensifying geopolitical and trade tensions in an already tumultuous environment may reignite risk-aversion among investors and affect capital flows.
  • Looking at the structural risks that will shape the future of credit, greater pressure from the physical and transition risks associated with climate change, particularly in geographies that are most exposed, are joined by rising systemic risks from digital disruption.
  • Our view remains that global credit conditions are likely to remain supportive in 2025 against this backdrop of structural and thematic change. But any improvement in global credit conditions will be along a narrow path strewn with overlapping risks.

25. Credit Cycle Indicator Q1 2025: The Recovery Could Be More Elusive For Some, Jan. 15, 2025

Vincent R Conti, Singapore, + 65 6216 1188, vincent.conti@spglobal.com

  • Our forward-looking credit cycle indicators (CCIs) continue to signal a potential credit recovery in 2025, reflecting rising leverage and accommodative financing conditions.
  • The divide between the corporate and household sectors continues. Improving earnings growth and supportive market conditions are buoying corporate credit, while household credit is still undergoing a correction.
  • Macroeconomic and geopolitical risks will test some markets more, spelling diverging recovery prospects across geographies.

26. CreditWeek: How Could U.S. Public Finance And Insurance Issuers Be Affected Post-L.A. Wildfires?, Feb. 7, 2025

Nora G Wittstruck, New York, + (212) 438-8589, nora.wittstruck@spglobal.com

  • As the L.A. County wildfires are poised to become the largest insured wildfire event in history (with loss estimates of $20 billion-$50 billion), total economic damages could surpass $250 billion.
  • Looking forward, the shift in wildfires to urbanized from rural areas in California will require local governments and utilities to meet a higher standard of risk resilience for infrastructure, services, and financial preparedness.
  • As wildfire risks increase—many of them caused, at least in part, by climate change—we are reassessing whether utilities' liquidity, insurance, asset adequacy, resilience, and emergency preparedness are insufficient or outdated.
Decentralized finance

27. Stablecoin Regulation Gains Global Momentum, Feb. 10, 2025

Todd D Kanaster, ASA, FCA, MAAA, Englewood, + 1 (303) 721 4490, Todd.Kanaster@spglobal.com

  • Stablecoin issuance has grown rapidly in recent years and become a significant part of the financial system, which has led to regulatory scrutiny around the world.
  • Most regulations center on liquidity, reserves, and transparency, as well as combating illicit activity and aligning with existing financial regulations.
  • Europe has enacted a comprehensive framework for member states that we think could set the standards for other jurisdictions.
  • We expect federal stablecoin legislation in the U.S. to gain momentum in 2025.

28. Investors' Risk Awareness Increases As Stablecoins Gather Momentum, Jan. 30, 2025

Lisa R Schroeer, Charlottesville, + (434) 529-2862, lisa.schroeer@spglobal.com

  • The stablecoin industry continues to expand, with a significant increase in market capitalization and the addition of new coins.
  • Expected pick-up in the tokenization of real-world assets (RWA) and efforts to capture yield increase the utility of stablecoins. The implementation of regulatory frameworks will be key to spur adoption.
  • In December of 2023, S&P Global Ratings launched Stablecoin Stability Assessments (SSAs) with eight assessments. We have since added four more.
  • Our SSAs include dollar and euro-pegged, interest-earning, decentralized, and crypto-backed stablecoins that reflect the broader stablecoin market. Cumulatively, the 12 stablecoins we have assessed so far represent more than 95% of the total outstanding stablecoin volume.
Economics

29. Economic Outlook Asia-Pacific Q1 2025: U.S. Trade Shift Blurs The Horizon, Nov. 25, 2024

Louis Kuijs, Hong Kong, +852 9319 7500, louis.kuijs@spglobal.com

  • While China's stimulus measures should support growth, we expect its economy to be hit by U.S. trade tariffs on its exports. In all, we now project 4.1% GDP growth in 2025 and 3.8% in 2026; that's 0.2 percentage point (ppt) and 0.7 ppt lower than our forecast in September.
  • Asia-Pacific growth will be impeded by slower global demand and U.S. trade policy. But lower interest rates and inflation should ease their drag on spending power. And in emerging markets, robust domestic demand growth is buoying GDP growth.
  • Swings in capital flows driven by shifts in expectations about U.S. interest rates and trade policies require central banks to be vigilant and cautious. We expect Asia-Pacific central banks to take their time bringing policy rates down.

30. Economic Outlook Canada Q1 2025: Immigration Policies Hamper Growth Expectations, Nov. 26, 2024

Satyam Panday, San Francisco, + 1 (212) 438 6009, satyam.panday@spglobal.com

  • We expect GDP growth of 1.2% in 2024 (unchanged from previous forecast) before accelerating to 1.7% in 2025 (was 2.0%).
  • A substantial deceleration in population growth next year as new immigration curbs take effect will counter any boost to the economy from lower borrowing costs. Stalling population growth will simultaneously reduce aggregate demand and the labor supply.
  • We anticipate the Bank of Canada will remain on course to steadily cut rates until it reaches 2.25% by the middle of next year.
  • The key risk for Canada's economy from the U.S. presidential election is that a Trump administration could pull out of the United States-Mexico-Canada Agreement, leaving Canada subject to any U.S. import tariffs.

31. Economic Outlook Emerging Markets Q1 2025: Trade Uncertainty Threatens Growth, Nov. 26, 2024

Elijah Oliveros-Rosen, New York, + 1 (212) 438 2228, elijah.oliveros@spglobal.com

  • A likely increase in trade protectionist policies among major economies will hurt GDP growth in most emerging markets (EMs) in the next couple of years, but the magnitude of the impact will depend on those policies' details, which will become clearer in the coming months.
  • For now, we assume only a modest increase in tit-for-tat tariffs between the U.S. and China in 2025 and no new tariffs for the rest of the world, which would produce a relatively modest net impact on GDP in most major EMs outside of China.
  • However, downside risks to our forecast are high, and potential tightening in financial conditions because of trade-related uncertainty adds another hazard.

32. Economic Research: European Housing Markets: Better Housing Affordability Supports Recovery, Jan. 27, 2025

Sylvain Broyer, Frankfurt, + 49 693 399 9156, sylvain.broyer@spglobal.com

  • Nominal house prices recovered rapidly in 2024 as housing affordability improved. This led to upward revisions in our price forecasts. We now expect house prices in the countries covered in this publication will increase by almost 3% per year on average over 2025-2027.
  • Idiosyncratic factors in countries such as Italy, Portugal, the Netherlands, Spain, and Ireland accelerate the recovery in these housing markets.
  • We expect easing monetary policies will mitigate the risk of rising mortgage rates, despite recent increases in long-term yields across Europe. The correlation between mortgage rates and policy rates remains strong.

33. Economic Outlook Eurozone Q1 2025: Next Year Will Be A Game Changer, Nov. 26, 2024

Sylvain Broyer, Frankfurt, + 49 693 399 9156, sylvain.broyer@spglobal.com

  • We project eurozone GDP growth of 0.8% in 2024 and 1.2% in 2025, with Germany lagging eurozone peers, and Spain continuing to outperform. Changes to our previous forecast largely reflect revisions of past data. Due to a more pronounced drop in energy prices, we expect inflation will be marginally lower in 2025 than we had anticipated (2.4% versus 2.5% previously).
  • A long period of very stable macroeconomic forecasts might come to an end as new leaders in the U.S., the EU, and Germany could take decisions early next year on tariffs, defense, and general spending that could reshape the economic outlook.
  • We anticipate the European Central Bank (ECB) will cut rates more quickly than we had previously expected due to persistently weak confidence and better visibility on the disinflation trajectory. That said, we do not expect that the extent of the rate cuts will exceed our previous forecast. We now project that the main policy rate will reach 2.5% before the summer of 2025, compared with our previous expectation of September 2025.

34. Economic Research: Macro Effects Of Proposed U.S. Tariffs Are Negative All-Around, Feb. 6, 2025

Paul F Gruenwald, New York, + 1 (212) 437 1710, paul.gruenwald@spglobal.com

  • The Trump administration has moved quickly to propose a new 25% tariff on goods imported from Canada and Mexico, and an additional 10% tariff on goods imported from China. Last-minute negotiations resulted in a one-month reprieve for both North American trading partners.
  • The S&P Global Ratings economics team--in our first high level estimates--found the potential effects of the tariffs are overwhelmingly negative, including slower GDP growth, higher unemployment and inflation, and a stronger U.S. dollar. The effects on the U.S. are smaller than for trading partners.
  • Uncertainty around the path of U.S. policy and its objectives is high, and confidence bands around our forecasts are correspondingly wide.
  • Moreover, the ongoing deal-making mode of the new administration risks complicating long-term decision making by both firms and households.

35. Global Economic Outlook Q1 2025: Buckle Up, Nov. 27, 2024

Paul F Gruenwald, New York, + 1 (212) 437 1710, paul.gruenwald@spglobal.com

  • Even before taking office, a second Trump administration is already moving the macro-financial needle and raising downside risks for the global economy. The degree of ultimate policy implementation is a key unknown.
  • Our preliminary policy read on the new U.S. administration is that positive growth effects will be minimal, inflation pressures will rise, and the Fed is likely to stop cutting rates earlier. This will lead to tighter financial conditions, a stronger dollar, and a more complicated macroeconomic picture elsewhere.
  • Owing to a "wait and see" approach, our GDP growth forecasts have not moved much since the previous publication, other than incorporating changes related to base effects.
  • Risks include the full implementation of the proposed U.S. agenda on taxes, trade, and immigration; the end of resilient consumer spending and labor demand; and bond market stress. AI is an upside.

36. U.K. Economic Outlook 2025: Monetary Policy And Trade To Offset Fiscal Impetus, Nov. 26, 2024

Marion Amiot, London, + 44(0)2071760128, marion.amiot@spglobal.com

  • After a slower second half this year, the U.K. economy looks set to gather steam on looser fiscal policy, with GDP rising by 1.5% in 2025 versus our September forecast of 1.2%, and maintaining a similar pace through 2027.
  • But we now expect the Bank of England (BOE) to cut its rate only four times over the next quarters to 3.75% by the end of 2025, as a result of stronger jobs growth and inflation stemming from higher government spending.
  • These factors will likely dilute the economic impulse of the policy stimulus at a time when geopolitical risks and the potential for trade frictions have increased following the U.S. elections, though the impact on the U.K. is minimal at this stage.

37. Economic Research: Which Sectors Would Be Most Vulnerable To U.S. Tariffs On Canada And Mexico?, Jan. 30, 2025

Stefan Bauerschafer, Paris, (33) 6-1717-0491, stefan.bauerschafer@spglobal.com

  • Our baseline economic forecast doesn't incorporate U.S. tariffs on Canada and Mexico, but given high uncertainty, we've estimated which sectors would be the most vulnerable to President Trump's suggested 25% tariffs on both countries.
  • Based on global input-output tables, output from the auto and electrical equipment sectors is most exposed to a tariff shock in Mexico, while commodity-related processing sectors have the largest exposure in Canada.
  • For the U.S., we estimate a much smaller output at risk if its direct neighbors were to impose in-kind tariffs, but the most exposed sectors would be agriculture and fishing, metals, and autos.

38. Economic Research: How Might Trump's Tariffs--If Fully Implemented--Affect U.S. Growth, Inflation, And Rates?, Feb. 7, 2025

Satyam Panday, San Francisco, + 1 (212) 438 6009, satyam.panday@spglobal.com

  • For now, our economic forecast for the U.S. remains unchanged. However, if the U.S. follows through on the tariffs it announced for Canada and Mexico, and if they stay in place, we think it would be a significant enough development to cause a change in our baseline U.S. forecast.
  • The new tariffs--by our rough estimate--could cause a one-time 0.5%-0.7% rise in U.S. consumer prices, assuming the tariffs remain in place through 2025. Our rough estimate also sees U.S. real GDP over the next 12 months being 0.6% lower than what we're currently forecasting.
  • In this scenario, the Federal Reserve would pause its rate-cutting cycle earlier than we currently forecast.

39. Economic Outlook U.S. Q1 2025: Steady Growth, Significant Policy Uncertainty, Nov. 26, 2024

Satyam Panday, San Francisco, + 1 (212) 438 6009, satyam.panday@spglobal.com

  • We forecast the U.S. economy to expand 2.0% in the next two years--incorporating partial implementation of Trump's proposed policies--following 2.7% growth this year.
  • We expect the Federal Reserve to reduce the federal funds rate more gradually than what we had considered in our September forecast update and reach an assumed neutral rate of 3.1% by fourth-quarter 2026 (was fourth-quarter 2025 previously).
  • Uncertainty around our forecasts is high given unknowns about how much of President-elect Trump's campaign promises will materialize.
  • Trump's policy proposals from his campaign, at face value, could result in higher inflation in the near term and lower growth in the medium to long term. And the probability of a disruption to the Fed's easing bias over the next two years has risen.
Environmental, social, and governance

40. Sustainability Insights: Global Sustainable Bond Issuance To Hold Steady At $1 Trillion In 2025, Feb. 5, 2025

Patrice Cochelin, Paris, + 33144207325, patrice.cochelin@spglobal.com

  • Green bonds will continue to dominate issuance, with transition and sustainability-linked bonds potentially helping to push total sustainable bond issuance to $1 trillion this year.
  • More than $900 billion of rated outstanding sustainable bonds mature in the next two years and nearly $2.5 trillion before the end of the decade, testing market participants' commitment to climate action and the strength of the sustainable bond market.
  • Efforts to close the climate finance gap in lower-income countries, a rebound of sustainability-linked issuance, a broader base of transition bond issuers, or expanding issuance in China could be swing factors for 2025 volumes.
Financial institutions

41. Sector Review: China Brief: Securities Firms Await Revival In Market Sentiment, Jan. 27, 2025

Yiran Zhong, Hong Kong, 25333582, yiran.zhong@spglobal.com

  • China's latest capital market measures could unlock earnings potential for securities firms. But S&P Global Ratings believes much depends on whether investor sentiment will really improve.
  • For now, some firms could see lower contributions from their consolidated mutual fund subsidiaries as fee income declines. Further, continued execution of swap facilities would increase the parents' stock market exposure--adding to volatility.

42. The Top Trends Shaping European Bank Ratings In 2025: Solid Positions, Growing Ambitions, Jan. 27, 2025

Nicolas Charnay, Paris, nicolas.charnay@spglobal.com

  • Our outlook for European banks remains steady. As of January 2025, 75% of relevant rating outlooks were stable, and a further 19% were positive. This resilience reflects our view that European banks will continue to take advantage of benign credit conditions in 2025 to consolidate their financial and business positions, and to expand their ambitions.
  • By almost every conventional metric, European banks should hold their own in 2025. There is a weaker tail of banks, but by and large we expect solid profitability, sound capitalization and ample liquidity to continue. Key priorities for banks will be to compete for returning loan growth, develop recurring fee income bases and control costs. Banks' capital distribution capacity will remain strong.
  • At the same time, geopolitical risks remain high in Europe. This, together with potential pivots on trade and fiscal policies, could challenge our economic base case and financial markets' conditions. Any abrupt change in conditions or macro-financial shocks would hurt banks with weaker franchises or perceived business model challenges.
  • More confident in their financial standing and bolstered by positive market repricing, some European banks are leveling up their ambitions. Be it to diversify their product lines or build scale, inorganic growth and partnerships opportunities are back on the agenda. For banks with less resources to invest, competing will be increasingly harder.
  • "Economic competitiveness" is high on policy agendas. Supervisors' attention remains on geopolitical risks, liquidity and operational resilience, and environmental risks. A regulatory rollback is unlikely but banks advocating for a reduction of red tape could find a friendly ear with some policymakers.

43. Japan Banking Outlook 2025: Tailwinds And Tests Of Resilience, Jan. 30, 2025

Kensuke Sugihara, Tokyo, + 81 3 4550 8475, kensuke.sugihara@spglobal.com

  • We expect rising interest rates and increased lending will continue to help Japanese banks improve their performance, with tailwinds stronger and more sustained for larger banks.
  • Low credit costs and selling off strategic investment stocks will likely mitigate the negative impact of higher interest rates.
  • The main risk factors are the new U.S. administration, excessive emphasis on shareholder value, and fierce competition among Japanese banks.

44. North African And Eastern Mediterranean Banking Outlook 2025: A Mixed Bag, Feb. 3, 2025

Regina Argenio, Milan, + 39 0272111208, regina.argenio@spglobal.com

  • Generally improving economic and operating conditions in North Africa and the Eastern Mediterranean resulted in several positive rating actions on banks in 2024. Some outlooks are positive.
  • Banks' economic and operating environments remain vulnerable to ongoing reforms and external shocks, including U.S. protectionism, a sharper-than-expected downturn in advanced economies weighing on global trade, and higher-for-longer interest rates. In some cases, they are also vulnerable to a potential spillover from the intensification of regional tensions.
  • Even though declining global and domestic interest rates will dent banks' net interest income, higher lending growth and improving asset quality will protect their bottom lines.
  • We expect problem loans will continue to emerge over the next two years, with some banking sectors more affected than others. We forecast that past efforts to build up reserves, coupled with economic recovery, will limit credit impairments. We expect credit losses will range between 160 basis points (bps) in Tunisia and 80 bps in Morocco.
  • Banks' large and stable deposit base will continue supporting lending across all geographies. Egyptian and Turkish banks continue to rely on the implementation of reforms to achieve sustainable disinflation and stable foreign-exchange rates.

45. 2025 Taiwan Money Market Funds Outlook: Enhanced Credit Score Buffer Supports Stable Outlook, Feb. 11, 2025

Caroline Shih, Taipei City, +886-2175-6833, caroline.shih@spglobal.com

  • We anticipate a stable credit trend for Taiwan fixed-income funds that we rate in 2025. This primarily reflects the funds' increased credit score buffer following the implementation of our refreshed fund criteria in July 2024. Our view of continued credit stability also reflects our assessment of the fund managers' sophisticated risk controls, the stable credit outlook of most invested entities, and stringent local regulations in Taiwan.
  • The updated criteria allow us to utilize global ratings from other credit rating agencies' which are generally higher than the in-house credit estimates that we used previously as a rating input for the fund ratings model. In some cases, this may leave a buffer for fund managers to adopt more aggressive investment strategies. However, we believe that fund managers in Taiwan will generally focus on duration management rather than increasing their investments in lower rated assets, due to stringent local regulations in Taiwan and fund houses' consistent risk management.
  • We expect the industry's aggregated fund size to remain largely unchanged during 2025, given the likely persistent gap between on-shore and off-shore interest rates over the period. Meanwhile, the continuing plateau in interest rates at the start of the year and likely over the next few quarters, could incentivize managers to expand portfolio tenor, but the expansion is unlikely to be overly aggressive to negatively affect rating performance. We continue to assess the liquidity management of most funds is sufficient and mainly supported by stable liquidity preparation that is in line with the historical average.

46. U.S. Securities Firms Outlook 2025: Uncertainty Could Cloud Otherwise Favorable Conditions, Jan. 31, 2025

Devi Aurora, New York, + 1 (212) 438 3055, devi.aurora@spglobal.com

  • Generally favorable market conditions have and may continue to support good investment banking and asset-based fee revenue, and retail client asset growth, while also being volatile enough to boost technology-driven trading firms' revenue.
  • The election results call into question the pace of future interest rate cuts. If rates stay higher for longer, we could see a return to runoffs in retail clients' uninvested cash balances and all firms' funding costs remaining elevated.
  • Unless halted by the new administration, implementation of the Securities and Exchange Commission (SEC)'s reforms on execution of customer trade reporting and equity market structuring are expected to modestly increase costs but not materially change payment for order flow (PFOF) for retail or wholesaling firms.
  • The change in administration will likely limit further regulatory reforms and could result in some rollbacks or a halt to implementation of recently passed rules.
  • Despite these potential headwinds, we expect our ratings to be largely steady, with most firms maintaining solid capital and liquidity.
Healthcare and pharmaceuticals

47. Health Care Brief: Better Earnings Visibility Revives French Laboratories' Efforts To Improve Credit Metrics, Feb. 10, 2025

Lucie Gosse, Paris, 140752539, lucie.gosse@spglobal.com

  • Laboratories in France will benefit from incremental organic growth and margin expansion under a new regulatory framework.
  • We expect pressure on laboratories' revenues and margins will decline over the next 12-24 months as laboratories will no longer face a revenue cap of 0.4% or additional tariff cuts.
  • This will spur volume growth and enhance market share gains. Laboratories will likely focus on streamlining costs to enhance efficiency and support margin expansion. With no significant market consolidation in sight, this should improve laboratories' credit metrics and support deleveraging.

48. Health Care Services Credit Outlook Revised To Stable On Broadly Better Operating Performance, Feb. 5, 2025

David P Peknay, New York, + 1 (212) 438 7852, david.peknay@spglobal.com

  • Good revenue and patient volume trends in 2024 helped improve operating results for many health care services companies that we rate. Better labor and inflationary environments also contributed. We expect these conditions to extend into 2025, but not necessarily equally across all subsectors.
  • We have fewer negative outlooks, and our negative rating bias is better than early last year. Given the greater balance and overall favorable operating expectations for 2025, we revised our sector forecast to stable from negative.
  • Many health care services companies are adjusting their strategies to address specific challenges and industry developments and to set priorities for the next several years. Coupled with our operating expectations, we expect further improvement or relatively stable conditions. Still, the lowest-rated companies remain vulnerable to downgrades because of little cushion to withstand extended operating weakness or an insufficient pace of cash flow improvements.
  • While we view health care services companies more favorably, the new federal administration presents significant uncertainty that could constrain their credit quality.

49. Pharmaceutical Industry 2025 Credit Outlook Is Stable As Healthy Revenue Growth Mitigates Pressures, Feb. 3, 2025

David A Kaplan, CFA, New York, + 1 (212) 438 5649, david.a.kaplan@spglobal.com

  • S&P Global Ratings' 2025 credit outlook for the global pharmaceutical industry is stable, reflecting our expectation for a balanced mix of upgrades and downgrades.
  • Given the steady cadence of new products, we expect healthy revenue growth for branded pharma through 2027, despite various products losing exclusivity, headwinds from growing biosimilar competition in the U.S., and pressures from Medicare price negotiation under the Inflation Reduction Act (IRA) of 2022.
  • We anticipate spending on M&A will moderately increase in 2025, supported by fewer regulatory constraints under the new U.S. administration albeit restrained by the increase in borrowing costs in the U.S. (relative to the low levels over the past decade), debt leverage that is still elevated relative to historical levels at many companies, and the limited need for M&A given healthy organic revenue growth for Big Pharma though 2027.
  • We expect companies with prospects for weaker-than-average revenue growth to be more likely to pursue debt-financed M&A, even at the risk of a downgrade.
  • In the more commodity-like generic drug industry, we expect mid-single-digit percent annual price erosion and modest organic revenue growth, in line with 2024, but a substantial improvement from trends in prior years. We also anticipate robust revenue growth for biosimilars, though intense competition may limit profit margins.
Infrastructure

50. From Tariffs To Traffic Volumes: Potential Economic Effects On Mexican Toll Roads, Feb. 6, 2025

Daniel Castineyra, Mexico City, + 52(55)5081-4497, daniel.castineyra@spglobal.com

  • Amid high industrial and commercial activity, we expect Mexican toll road performance to remain strong in the next 12-24 months, with traffic volumes outpacing national GDP projections about 2x.
  • Nonetheless, increased dependence on economic activity with the U.S. means heavy vehicle traffic could weaken if President Trump's administration adopts a general tariff policy on Mexican exports, denting economic activity.
  • In this context, we think Mexican toll projects' subordinated series debt would be most affected, with the potential for rating changes, while debt service coverage ratios (DSCRs) are sufficient for senior series debt to absorb a deterioration in heavy traffic volumes.
Insurance

51. Reinsurance Renewals For January 2025 Show Ample Capacity Amid Elevated Catastrophes And Adverse Casualty Trends, Jan. 30, 2025

Taoufik Gharib, New York, + 1 (212) 438 7253, taoufik.gharib@spglobal.com

  • Bolstered capital from strong earnings in 2024 led to ample capacity and healthy competition from reinsurers during January 2025 renewals, resulting in downward pressure on pricing across property and property catastrophe lines.
  • Casualty reinsurance renewals were also orderly with abundant capacity, despite reinsurers' tough talk about pricing heading into 2025.
  • Alternative capital remains an important source of capacity for the property catastrophe market and will likely end 2024 at an all-time high, boosted by strong catastrophe bond issuance.
  • Reinsurers are expected to bear a meaningful portion of the costs related to the California wildfires, which are poised to become the largest insured wildfire event in history, with loss estimates of $20 billion-$50 billion.
  • We maintain our stable view on the global reinsurance sector, which is poised to earn its cost of capital in 2024-2025.

52. Global Reinsurance Sector View 2025: Promising earnings prospects with an eye on U.S. casualty, Jan. 29, 2025

Taoufik Gharib, New York, + 1 (212) 438 7253, taoufik.gharib@spglobal.com

  • Tailwinds: 1. Expected strong operating profits, aiding reinsurers in earning their cost of capital in 2024-2025. 2. Robust capitalization redundant at the 99.99% confidence level at year-end 2023 and expected to remain so through year-end 2024, providing a cushion for potential stresses. 3. Favorable reinsurance pricing, supported by terms and conditions in short-tail lines, overall underwriting discipline, and increasing reinsurance demand. 4. Strong investment income due to high bond yields.
  • Headwinds: 1. Elevated natural catastrophe insured losses influenced by inflation, urbanization, and climate change. 2. Economic inflation, although abating, and social inflationary concerns, as reflected in adverse loss cost trends in certain U.S. casualty lines. 3. Potential financial market volatility and geopolitical tensions affecting both sides of the balance sheet. 4. Relatively high cost of capital.

53. Insurance Brokers And Servicers Sector View 2025: Growth Amid An Evolving Landscape, Jan. 27, 2025

Julie Herman, New York, + 1 (212) 438 3079, julie.herman@spglobal.com

  • Robust broker revenue and earnings growth in 2025 despite moderating tailwinds. While stabilizing insurance rates and subdued inflation will weigh on organic growth relative to the highs of the past few years, most of our rated brokers will continue to capture share in an increasingly sophisticated market.
  • Somewhat higher risk and a less consistent trend among non-brokers. These companies will continue to demonstrate mixed performance but should largely withstand market headwinds, supported by generally steady retention, continued product and market expansion, and effective expense management.
  • The industry will remain highly acquisitive We expect continued heavy inorganic growth on the heels of three blockbuster deals in 2024.
  • Aggressive financial leverage remains a key rating constraint Issuers have not tempered financial leverage despite the higher cost of capital. However, gradually reducing interest rates should improve the thin coverage cushions relative to our downgrade triggers for many issuers.

54. Japan Insurers In 2025: Things Are Looking Up, Jan. 31, 2025

Toshihiro Matsuo, Tokyo, + 81 3 4550 8225, toshihiro.matsuo@spglobal.com

  • Credit fundamentals in Japan's insurance sector will continue improving in 2025, in our view.
  • Preparations for the introduction of the new solvency regulations are near final.
  • Expansion drives make managing the capital burden of acquisitions and integrated risk management more important.

55. North American Life Insurers Sector View 2025: Very Cautious Optimism, Jan. 29, 2025

Carmi Margalit, CFA, New York, + 1 (212) 438 2281, carmi.margalit@spglobal.com

  • Life insurance remains one of the most stable and highly rated sectors that S&P Global Ratings covers. The median rating for U.S. life insurers is 'A+'; 97% are in the 'AA' and 'A' rating categories.
  • Market fundamentals will likely benefit insurers' profitability but not to a significant enough degree to affect our ratings.
  • We are closely following several trends that each could either be beneficial or detrimental to life insurers in the medium-to-long term: - The macroeconomic environment, including interest rates, corporate bond defaults, and the risk of recession, is largely trending positive, but some risks persist. - Increased allocation to private-credit investments can potentially raise yields but also increase credit risk. - Greater use of offshore reinsurance brings more third-party capital to the industry and better capital efficiency but could decrease transparency for investors, regulators, and others. - Exposure to commercial real estate, particularly office buildings, will likely cause some investment losses, but we believe they will largely be contained.
  • We are also monitoring additional drivers of uncertainty for the industry for which the outcomes and impacts on life insurers are still developing (such as geopolitical tensions, regulation, and AI).

56. U.S. Health Insurance Sector View 2025: Elevated Earnings Risks And Health Policy Uncertainty, Jan. 29, 2025

James Sung, New York, + 1 (212) 438 2115, james.sung@spglobal.com

  • We revised our U.S. health insurance sector view to negative from stable.
  • Key drivers include: - The recent and projected strain in operating performance, predominantly in the Medicare Advantage (MA) and Medicaid segments, and in certain geographic markets; - A rising share of negative rating outlooks (35% as of Jan. 29, 2025) based on company-specific earnings deterioration and criteria changes; and - Higher legislative and regulatory risk, which could affect both health insurance and pharmacy-related segment.
  • Nevertheless, long-term sector fundamentals remain solid: -The average financial strength rating of 'A/A-' among the rated companies reflects strong and stable competitive positions, supported by overall pricing flexibility, favorable long-term growth prospects, and high barriers to entry; - Sound balance sheets, manageable leverage, and healthy operating cash flows also provide financial flexibility that supports overall credit quality; and - Solid long-term sector fundamentals suggest that not all negative rating outlooks will result in downgrades in 2025- 2026, particularly if operating performance stress is not sustained for an extended period.

57. U.S. Property/Casualty Insurance Sector View 2025: Grappling With Natural Catastrophes And Rising Claims Costs, Jan. 29, 2025

David Veno, Princeton, 212-438-2108, david.veno@spglobal.com

  • What we saw in 2024: 1. Near or record earnings, including net investment income; industry delivered solid results in the first nine months in 2024 (and likely for the year). 2. Sharp recovery in personal lines' underwriting results as cumulative rate increase and other underwriting actions implemented from previous years take effect. 3. Elevated natural catastrophe losses and reinsurance protection is more expensive, but insurers have mitigated the impact on underwriting results through disciplined pricing and exposure management. 4. The favorable pricing trend subsided, but profit margins remained strong for commercial lines. 5. Diminished reserve releases, as long-tail lines confront claims inflationary pressure. 6. Robust capital position attributed to strong retained earnings, with investments having largely reversed the deterioration stemming from rising interest rates in 2022. 7. We have more companies on positive (12%) than negative (6%) outlooks, though the number of rating changes is expected to be relatively modest.
  • What we expect in 2025: 1. Personal auto underwriting profits to normalize as insurers pivot to policies-in-force growth with flat to lower rate increases. 2. Significant wildfire losses in the first two weeks could create earnings pressure later, especially if 2025 proves to be above average for natural catastrophes. 3. Margin compression in commercial lines as pricing eases, but insurers remain disciplined in risk selections and exposure management. 4. Persistent social inflation pressure leading to higher cost of claims and cast uncertainties on reserves. Commercial auto, excess casualty, and professional liability remain vulnerable to adverse reserve development. 5. We expect industry capitalization to remain robust with ample loss-absorbing capacity attributed to stable underwriting margin and strong investment income. 6. Ongoing geopolitical tensions and proposed trade policy could weigh on market sentiment, leading to economic uncertainty and higher interest rates impacting earnings growth, investment asset valuation, and balance sheet shareholders' equity. 7. Accelerating digital technology adoption challenging talent acquisition, while giving rise to cyberattacks; insurers lacking well-tested cybersecurity playbooks are more vulnerable.
Leveraged finance

58. U.S. Leveraged Finance Q4 2024 Update: Outperforming Private Credits Thrive After BSL Transition, Feb. 1, 2025

Hanna Zhang, New York, + 1 (212) 438 8288, Hanna.Zhang@spglobal.com

  • In S&P Global Ratings' sample of private loans recently refinanced into broadly syndicated loans (BSL) in the U.S., institutional lenders selectively financed only high-quality private credit entities. The few that transitioned achieved nearly triple the median size of those in the broader credit estimate (CE) universe, showing robust growth and lowering leverage from initial CE levels.
  • Companies that transitioned to the BSL market outperformed other small-scale firms in the broader BSL portfolio. Their performance trends are similar to new BSL issuers in the health care, business and consumer services, and technology sectors rated 'B' and 'B-', which serve as our closest comparison group.
  • As competition for assets increases, loan spreads between the private credit and BSL markets will continue to narrow in the upper-middle-market segment. BSL issuers with lower credit ratings are likely to continue seeking private credit. Despite trends, we believe that overall growth in both markets will depend more on a rebound in LBOs and M&A than on competition between the two.
  • Speculative-grade issuers in the U.S. and Canada continued to grow reported EBITDA in the 12 months ended Sept. 30, 2024, though at a slower pace. However, median profit margins declined modestly, with 54% of issuers reporting lower margins.
Private markets

59. Private Markets Monthly, January 2025: S&P Global’s Leaders On How We Serve The Scale Of Private Funding, Feb. 1, 2025

Ruth Yang, New York, (1) 212-438-2722, ruth.yang2@spglobal.com

  • The next era of private markets is likely to be defined by their continued convergence (over competition) with public markets.
  • As a result, future growth may take on a wider path across asset classes, sectors, and structures—creating more opportunities alongside risks for a myriad of market participants who need transparency balanced across their public and private market exposure.
Public finance

60. Australia State Ratings At Risk As Fiscal Discipline Wanes, Feb. 4, 2025

Anthony Walker, Melbourne, + 61 3 9631 2019, anthony.walker@spglobal.com

  • Lax financial discipline in Australian states is stymying planned budget improvements and squeezing credit ratings. This drove our three negative outlook changes in 2024.
  • The problem is spending, not revenue. From 2020-2023, operating revenues are nearly A$150 billion higher than states' pre-COVID expectations, yet financial results continue to underperform. Operating spending is A$212 billion above forecasts for the period.
  • Ratings revisions loom if states fail to curb rising operating costs and cost blowouts.

61. Texas Schools Face Uncertain Fiscal 2026 Budget Cycle Amid Rising Costs, Stagnant State Funding, Feb. 10, 2025

Lauren Levy, Englewood, + 1303 721 4956, lauren.levy@spglobal.com

  • Texas public schools faced significantly increased credit pressure in 2024, with downgrades and outlook revisions to negative outpacing upgrades and positive outlooks.
  • We took negative rating actions on Texas school districts experiencing weaker local taxing base growth, declining enrollment, or management's difficulty in closing structural gaps due to constrained revenue or expenditure flexibility.
  • State legislative negotiations continue on increases to per-pupil funding and the establishment of a statewide Educational Savings Account (ESA) program for private and alternative school options, which could affect long-term funding for public schools.

62. Three U.S. Public Pension Points To Watch In 2025, Feb. 4, 2025

Todd D Kanaster, ASA, FCA, MAAA, Englewood, + 1 (303) 721 4490, Todd.Kanaster@spglobal.com

  • We expect U.S. public pension funded ratios will generally improve when measured as of the fiscal year ended June 30, 2024, and continue to improve in fiscal 2025 because of positive market results in the first half.
  • U.S. public pensions face growing risks because assets funding the plans are based on increasingly diverse and opaque allocations.
  • We expect pension contributions will increase due to inflation-driven salary growth, partially offset by cheaper new benefit tiers, a frequently used tactic that may no longer be viable.

63. U.S. Public Finance 2025 Outlook: Cautiously Stable For Most Sectors While Others Are Pressured, Jan. 30, 2025

Nora G Wittstruck, New York, + (212) 438-8589, nora.wittstruck@spglobal.com

  • Most sectors across U.S. public finance will experience stable credit quality in 2025. However, credit pressure could arise amid the new administration's federal policy decisions.
  • Uncertain federal policy could lead to inflation remaining above the 2% target for longer and dampen economic trends in 2025 after 2.7% growth in 2024.
  • Sector views for water and sewer and public power utilities remain negative, reflecting weakening financial margins and ongoing operational disruptions from severe weather events and climate hazards.
  • Credit quality bifurcation in the higher education sector has widened, with mixed rating actions expected for a third year. Highly regional, less-selective institutions could continue weakening while institutions with broad geographic reach and financial resources are better positioned to absorb operating pressures.
Real estate

64. Distress Event Could Derail Hong Kong's Home-Price Stabilization, Feb. 6, 2025

Edward Chan, CFA, FRM, Hong Kong, + 852 2533 3539, edward.chan@spglobal.com

  • We believe any high-profile defaults or restructurings by a major developer would squeeze industry funding, with effects rippling through the sector, hurting even highly rated names.
  • Under this scenario, sales volumes of primary residences in 2025 would fall to about half of our base-case forecast of 20,000 units and home prices could fall 5%-7%.
  • Developer margins would be squeezed, raising debt leverage.
Sovereigns

65. Africa Brief: CEMAC's Scarce External Financing Options Heighten Domestic Funding Uncertainty, Jan. 29, 2025

Hugo Soubrier, Paris, +33 1 40 75 25 79, hugo.soubrier@spglobal.com

  • The eroding external funding for members of the Economic and Monetary Community of Central Africa (CEMAC) could prompt the governments to increase regional market issuance.
  • CEMAC sovereigns are facing uncertain official creditor funding and limited international market access. As a result, they will likely intensify domestic currency financing on an already-saturated regional market.
  • Subscription rates are low, and banks' exposure to sovereigns are high. Member states' ability to meet financing needs has therefore decreased.
Structured finance

66. European Annual CMBS Monitor 2024, Feb. 4, 2025

Carla Powell, London, +44-20-7176-3982, carla.powell@spglobal.com

  • We continuously review all our rated European CMBS transactions. In 2024, we took rating actions on 15 CMBS transactions.
  • Rating actions were mainly affirmations (50.9% of the classes reviewed), followed by downgrades (31.9%), and upgrades (17.2%). We downgraded one 'AAA (sf)'-rated class of notes by one rating category to 'AA (sf)' considering that the transaction's credit quality had weakened due to the worsening credit quality of a few of its key office tenants.
  • Rating action severities were -2.7 notches and 1.4 notches for downgrades and upgrades, respectively.
  • We reviewed 42 CMBS transactions as part of our annual review process.
  • We rated one new CMBS transaction, and three existing transactions had tap issuances. The new transaction's assets, comprising serviced office assets, are in the U.K.
  • We withdrew ratings on 57 classes of notes in 16 transactions, mainly in redemption.

67. Credit FAQ: Germany's First Solar ABS Leads The Way For Europe, Feb. 4, 2025

Roberto Amato, Frankfurt, + 49 69 3399 9161, roberto.amato@spglobal.com

  • Europe's nascent solar asset-backed securities (ABS) market passed an important milestone in November 2024 with the closing of the first German--and European--public solar ABS.
  • The event, while welcome, highlights the extent to which the European market lags its U.S. counterpart, where S&P Global Ratings first rated a solar ABS transaction in 2013. And it comes against a backdrop of softer demand for residential solar panels in Germany.

68. Tender Option Bond 2025 Outlook, Feb. 3, 2025

Joshua C Saunders, Chicago, + 1 (312) 233 7059, joshua.saunders@spglobal.com

  • We believe 2025 tender option bond (TOB) trust issuance will surpass 2024 as short-term interest rates decline and spread opportunities for fund sponsors arise.
  • TOB trust issuance totaled approximately $7.0 billion in 2024 compared to $11.4 billion 2023, when refinancing activity surged.
  • Elevated short-term interest rates reduced spread opportunities for fund sponsors, driving down activity among third-party trusts.
  • Bank-sponsored issuance remained strong in the first half of the year, primarily driven by two large trusts established under Barclays' program in March and June.

69. Japan's 2024 Securitization Market: Issuance Returns To Growth, Feb. 10, 2025

Hiroshi Sonoda, Tokyo, (81) 3-4550-8474, hiroshi.sonoda@spglobal.com

  • Issuance increased 6% to about ¥6.1 trillion in 2024 with RMBS issuance declining 28% and ABS issuance increasing 30%; we expect a slight increase in total issuance in 2025.
  • During surveillance of Japanese securitization transactions we rate, we did not raise or lower any ratings in 2024.
  • In the J-REIT market, bond issuance remained well below that of 2021 or earlier; improvement in occupancy rates in office properties may slow in 2025.

70. SF Credit Brief: CLO Insights 2025 U.S. BSL Index: Exposure To 'B-' Assets Ticks Up In Q4; ‘BB’s From New Issue CLOs And Refi CLOs Compared, Feb. 10, 2025

Daniel Hu, FRM, New York, + 1 (212) 438 2206, daniel.hu@spglobal.com

  • Loans from 'B-' obligors in U.S. broadly syndicated loan (BSL) collateralized loan obligations (CLOs) have been on a steady decline since peaking at just over 30% in mid-2023.
  • After reaching a recent low in October 2024, at just under 25% of total BSL CLO assets, a handful of widely held issuers in different industries saw their ratings lowered to 'B-' in December 2024, resulting in a small uptick to back above 25%.
  • However, overall credit quality continues to improve, as the average S&P Global Ratings' weighted average rating factor (SPWARF) remains well below 2700 and the proportion of assets with ratings on a negative outlook has declined to below 13% of assets.
  • This is due, in part, to improving credit conditions and fewer companies having ratings with a negative outlook, but it's also due to CLO managers rotating into higher quality assets.

71. SF Credit Brief: U.S. CMBS Delinquency Rate Increased 4 Basis Points To 5.7% In January 2025; Office Rate Drops To 9.0%, Feb. 4, 2025

Senay Dawit, New York, + 1 (212) 438 0132, senay.dawit@spglobal.com

  • The U.S. CMBS overall delinquency rate increased 4 basis points month over month to 5.7% in January.
  • Office loan delinquency rates declined in January after almost reaching 10.0% last month. The all-time high in our series for office loans is 10.2%, recorded in July 2012.
  • By balance, delinquency rates increased for retail (26 basis points to 6.9%), multifamily (21 basis points to 3.9%), lodging (6 basis points to 5.2%), and industrial (16 basis points to 0.5%) and decreased for office (95 basis points to 9.0%).
  • Special servicing rates rose for multifamily, industrial, office, and lodging loans and decreased for retail loans.
  • The share of loans that were either modified or extended increased 28 basis points month over month to 8.4%.
  • Performed matured balloon loans account for 132 loans, or 1.8% of the loans outstanding. These loans are technically not delinquent on debt service payments and thus are not included in our overall delinquency rate, although they did not pay off at their maturity date.
Technology

72. China's DeepSeek Triggers Cycle Of Disruption, Feb. 10, 2025

Clifford Waits Kurz, CFA, Hong Kong, + 852 2533 3534, clifford.kurz@spglobal.com

  • China's DeepSeek AI model has upended assumptions about the cost of building powerful large language models (LLMs), opening the door to innovation by the country's internet companies.
  • We see potential for substantial upside business risk among the Chinese internet firms that push deeper into AI.
  • DeepSeek's breakthrough will put powerful LLM models in the hands of many, including Chinese firms without access to leading-edge AI chips.

73. Why Isn't AI Shaking Up Smartphone And PC Markets?, Feb. 6, 2025

Cathy Lai, Hong Kong, (852) 2533-3569, cathy.lai@spglobal.com

  • Smartphone and PC brands must invest in AI capabilities or risk falling behind.
  • At this stage, however, these investments are not driving early-replacement cycles, nor do we see any major ruptures to the competitive landscape.
  • This could change quickly, if software developments accelerate and offer more revolutionary changes to user experience.
  • Other wild cards include AI-related regulations. These could lead to separate software offerings and product paths, especially for China versus the rest of the world.

74. Seek And Deploy: How DeepSeek Is Reshaping U.S. Tech Industry's Competitive Dynamics, Feb. 6, 2025

Christian Frank, San Francisco, + 1 (415) 371 5069, christian.frank@spglobal.com

  • DeepSeek's groundbreaking AI techniques challenge industry assumptions about model development and deployment, demonstrating remarkable training efficiency and reopening a long-standing conversation about proprietary versus open-source model paradigms.
  • The startup's innovations could reshape the tech industry's competitive dynamics, potentially shifting value from infrastructure to software and platform, as well as accelerating AI adoption.
  • DeepSeek's success raises questions about U.S. semiconductor export controls and China's ability to innovate amid technological restrictions in the AI and chip manufacturing domains.
  • We have not yet taken any rating actions on issuers potentially challenged by DeepSeek's release. Many issuers have good cushion for the rating and uncertainty remains about the scope and timing of new AI developments.

75. Proposed Tariffs Could Hurt The Global Tech Sector If Levied Too Long, Feb. 4, 2025

David T Tsui, CFA, CPA, San Francisco, + 1 415-371-5063, david.tsui@spglobal.com

  • The 25% tariffs by the U.S. that were set to go into effect on Feb. 4, 2025, on Mexico and Canada imports will be paused for one month after agreements were reached on border control. A 10% tariff on China imports (on top of existing levies) took effect on Feb. 4, 2025. China immediately imposed tariffs of 10% to 15% on certain U.S. goods. We believe the longer the tariffs are in place, the longer lasting the chilling effect on the macroeconomy and IT spending behaviors could be.
  • Without any product exemptions, the newly proposed tariffs on U.S. imports would cover a broader scope of tech products, representing a higher proportion of overall global IT spending than the tariffs levied during President Trump's first term.
  • For companies with products that are in high demand or have high customer brand loyalty, we expect them to pass along most of the higher costs to customers. We expect more elastic customer demand behavior for products with close substitutes, which could see decreased consumption or delayed purchases.
  • While we are not currently anticipating any tariff-related rating changes to global tech companies, we recognize that any escalation will undoubtedly add to global economic uncertainty and downside risk to the global tech sector.
Webinars:

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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 Feb. 5.

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 Feb. 10.

This report does not constitute a rating action.

Primary Credit Analyst:Yucheng Zheng, New York + 1 (212) 438 4436;
yucheng.zheng@spglobal.com
Secondary Contacts:David C Tesher, New York + 212-438-2618;
david.tesher@spglobal.com
Joe M Maguire, New York (1) 212-438-7507;
joe.maguire@spglobal.com
Eunice Tan, Hong Kong + 852 2533 3553;
eunice.tan@spglobal.com
Jose M Perez-Gorozpe, Mexico City (52) 55-5081-4442;
jose.perez-gorozpe@spglobal.com
Paul Watters, CFA, London (44) 20-7176-3542;
paul.watters@spglobal.com
Research Contributor:Sourabh Kulkarni, CRISIL Global Analytical Center, an S&P affiliate, Mumbai;
sourabh.kulkarni@spglobal.com

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