On Credit: Trends and risks in the credit market in 2025

The new edition of On Credit brings updates on the global and local credit markets made by our specialists. Vanessa Muller, Global Private Investment Specialist, presents the local edition, offering an analysis of credit spreads in the Brazilian market. With a special focus on infrastructure debentures, she reveals the nuances of a complex scenario and discusses whether credit spreads have reached their minimum limit.

In the international edition, Alejandro Estevez-Breton, Marcelo Menusso and Rafael Gaiao provide a comprehensive analysis of trade uncertainty, corporate earnings, and resilient economic growth in the United States. The experts explore the impact of political changes on the market and share insights from a conference on emerging markets that took place in Miami.

Next, check out the highlights from the videos.

• Credit spreads in Brazil remain stable compared to the last quarter but showed volatility between December and January due to the outflow of resources from traditional credit funds, which underperformed the CDI for three consecutive months since October 2024.
• In February and March, there was a reversal of this trend, with spreads of CDI-indexed securities returning to previous levels, highlighting the resilience of the local private credit market.
• Infrastructure debenture funds showed greater stability, with spreads remaining virtually unchanged, although at historically low levels, indicating consistent demand for these assets.
• The reduction in new issuances at the beginning of the year, combined with the need for infrastructure funds to acquire assets to meet maturities and minimum allocations, pressures the decrease in spreads. However, moderate growth in fundraising and liquidity in the funds help maintain spreads at not-so-low levels, creating a delicate balance.
• Currently, there is no clear trigger for the future direction of spreads, which seem to have reached a lower limit, with no indications of an increase in the short or medium term.
• Discussions about tax reform and possible minimum taxation for individuals could introduce additional volatility in tax-exempt assets, affecting the private credit market.
• A mass outflow of resources from credit funds could significantly impact the scenario, but the existing liquidity acts as a buffer against rampant selling.
  
  

For more details, watch the full video:

• Four main sources of macroeconomic uncertainty are identified: the current trade shock, anticipated fiscal uncertainty, questions about the independence of the Federal Reserve, and the slowdown in immigration flows. These uncertainties can impact the economic and investment landscape.
• The Trump administration's trade agenda seeks to rebalance the economy, but its approach has generated volatility in the markets. Despite the uncertainties, U.S. economic growth is considered healthy, with low recession risks. However, trade and fiscal uncertainty may slow consumer spending and hiring.
• Investor sentiment towards emerging markets is more positive, albeit cautious, suggesting a potential for increasing but selective allocation.
• Company fundamentals remain strong, with solid earnings and good liquidity. Executives are showing caution regarding the economy. While first-quarter 2025 earnings are 7% above the previous year, estimates have been lowered, with 63% of companies issuing negative guidance.
• U.S. Treasury yields fluctuated, initially rising due to inflation expectations and later falling due to concerns about economic growth.
• The period of 2018-2019 becomes a useful reference for assessing the risks of U.S. tariffs on emerging market bonds, indicating potential volatility in scenarios of escalating trade conflicts.

For more details, watch the full video: