In this edition of Instant Insights, our key takeaways from recent articles include the following: the biggest risks to global credit in 2025, our Asia-Pacific speculative-grade corporate default forecast, and our outlooks on global heavy-duty truck sales, European structured finance, and covered bonds. We dive into global nonfinancial corporate medians, the global corporate default tally, banks in Italy and Central and Eastern Europe, off-patent pharmaceuticals, North American low-speculative-grade chemical producers, nuclear power, airports and private debt in Europe, the EMEA corporate transportation investment-grade portfolio, insurers in Saudi Arabia, the rating implications of structured joint venture minority interest transactions, and the effects of cyber-attacks on structured finance. We also feature slide decks on Asia-Pacific and North America credit conditions, the 2023 annual default and rating transition studies covering Mexican structured finance and Mexican national scale corporates and public finance, Emerging Markets Monthly Highlights, EMEA financial institutions monitor, North American first-lien debt recoveries, Argentina's economic adjustment, consumer loan ABS in Hong Kong, not-for-profit higher education outside of the U.S., Australian universities, the Sheinbaum administration's agenda, as well as GSIBs, office REITs, key takeaways from public finance in 2024, rated not-for-profit retail electric and natural gas utilities, not-for-profit higher education, not-for-profit acute health care, the CMBS delinquency rate, CMBS exposure to General Services Administration's office leases, the auto loan ABS tracker, and the BSL CLO index in the U.S.

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

Key Takeaways From Our Most Recent Reports

Credit conditions

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

• 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

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

• 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.

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

• 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.

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

• 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.

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

• 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.

Autos

7. Auto Industry Buckles Up For Trump's Proposed Tariffs On Car Imports, Nov. 29, 2024

• We estimate a 20% tariff on U.S. light vehicle (LV) imports from the EU and the U.K., and a 25% tariff on imports from Mexico and Canada could cost affected European and U.S. carmakers up to 17% of their combined annual EBITDA in a worst-case scenario.
• Particularly exposed to potentially higher tariffs are premium original equipment manufacturers (OEMs) Volvo Cars and JLR--given their high reliance on European production--and GM and Stellantis due to the volume of cars they assemble in Mexico and, partly, Canada. The risks for BMW and Mercedes are more contained.
• That said, we expect mitigating actions will make potentially higher tariffs manageable, but the combined effects of tariffs, tighter CO2 regulation in Europe from 2025, and earnings pressure from stronger competition in China and Europe could increase the risk of downgrades.

Capital goods

8. 2025 Global Outlook For Heavy-Duty Trucks Isn't Rosy, Dec. 11, 2024

• We forecast that global sales of heavy-duty trucks (HDTs) will increase globally by low single digits to about 1.95 million units in 2025, up from 1.93 million units expected for 2024. The market continues to normalize in Europe, with a declining trend, and recovers moderately in North America and Asia-Pacific (APAC).
• Anticipated tightening capacity, a rebound in freight rates, and aging fleets will likely spur new truck purchases in the second half of 2025 globally, albeit delivery trends will differ across regions.
• Pre-buying activity ahead of the transition to stricter emission regulations could increase demand in the truck market, with potential positive momentum in the U.S. in 2026 and in Europe in 2027.
• While electric truck sales continue to represent a small share of total deliveries, we expect the transition toward zero-emission vehicles (ZEVs) will accelerate over 2025-2030, supported by advances in battery economics and charging infrastructures.
• Supply chain issues and widespread component shortages have eased further in 2024, but intensifying U.S.-China trade tensions and the extent of Mr. Trump's proposed trade tariffs could lead to a deterioration over 2025-2026.

Chemicals

9. North American Low Speculative-Grade Chemical Producers Face Refinancing Risk Amid Slow Recovery, Dec. 6, 2024

• Following a period of soft demand, marred by a subdued macroeconomic environment and destocking in 2023, the North American chemicals sector has started to show signs of recovery in the latter half of 2024 through gradual improvements in volumes and cost-control measures to mitigate end-market demand headwinds. However, we expect risks to the operating and macroeconomic environment to persist in 2025.
• Speculative-grade issuers have seen a mix of positive and negative rating actions during the year--in contrast to primarily negative rating actions in 2023. Overall, the proportion of companies rated in 'CCC+' or weaker has decreased to about 10% of our speculative-grade pool from about 16%.
• Despite high refinancing activity in 2024, there are still refinancing risks for debt maturing in 2025 and 2026, particularly for issuers rated 'B-' and below, which hold more than half of the maturities.

Corporates

10. Corporate Horizons: A Deeper Dive On The Rating Implications Of Structured JV Minority Interest Transactions, Dec. 11, 2024

• We have recently seen a growing number of transactions where investment-grade (IG) companies sell large minority positions in joint ventures (JVs) to financial investors, typically using sale proceeds to fund multi-year capital expenditure projects, make shareholder returns, or for liability management.
• These transactions come in many different varieties, with a common objective to enable the corporate issuer to access a new source of capital while avoiding a direct hit to their balance sheet in the form of additional debt issuance.
• In our view, the minority capital contributed to these JV structures sits somewhere between pure equity and pure debt, with many features reminiscent of hybrid securities in terms of whether this "equity" will truly be loss absorbing and lead to cash conservation when needed.
• Regardless of whether we choose to make an initial debt adjustment, with all of these structures there is no "free lunch," as either a debt-like liability is created or cash flow and full control over typically stable assets is ceded.

11. Global Nonfinancial Corporate Medians History And Outlook 2025: A positive outlook for corporate credit fundamentals, Dec. 4, 2024

• Growth to accelerate in 2025. Following a relatively weak 2024, we anticipate revenue and EBITDA growth will accelerate in the year ahead. This improvement is expected across the board, with almost all regions, ratings categories, and industries expected to see faster growth. The growth rates themselves are still modest, however. Global median revenue growth of 3.6% and 4.6% is forecast for investment grade and speculative grade entities, respectively. The equivalent EBITDA figures are 6.0% and 8.4%.
• Profit margins will likely expand further, particularly for 'AA' rated entities in investment grade, and more generally for speculative-grade entities.
• Stronger growth and improving profitability will see leverage continue to fall. Median 'B-' rated debt/EBITDA multiples are anticipated to fall below their 2019 level by the end of 2025, and median speculative-grade 2025 debt/EBITDA multiples will likely be below the prior 5- year average for most industry sectors.
• With rate pressure easing, interest coverage is starting to recover although is still below 2019 levels for two-thirds of industries. Financing costs remain elevated relative to their 2021 low and will likely remain structurally higher given ongoing inflation pressures and the resilience of the global economy.
• The overall picture is one of broadly favorable trends in credit fundamentals for 2025, even if vulnerabilities are still apparent in the weaker part of the credit spectrum. Macro and geopolitical risks – notably trade and conflict – have the greatest potential to undermine the relatively benign outlook apparent in our nonfinancial corporate sector forecasts.

12. Corporate Results Roundup Q3 2024: Ex-commodity EBITDA growth accelerates, but still driven by margins not revenues, Nov. 25, 2024

• With over 2,000 companies having reported, the Q3 2024 results season for rated nonfinancial corporates is 77% through. North American companies are near complete with 93% having reported.
• Excluding resource companies, global EBITDA growth is rising at its fastest annual rate (+8.1%) since Q2 2022 (+9.4%), up from 6.6% last quarter. Across all companies, annual EBITDA growth is more pedestrian, up 3.6%.
• As in recent quarters, this improvement is margin driven rather than reflecting strong revenues. Measured at an annual rate, global revenues for companies rated by S&P Global Ratings that report quarterly are up 0.9% based on current results, and 2.2% if commodity-linked sectors are excluded.
• Technology companies lead the growth contribution tables, notably NVIDIA, Amazon, Alphabet, and Microsoft. Oil companies are exerting the biggest negative drag on EBITDA growth (BP, Shell, and TotalEnergies).
• Interest-rate pressure is continuing to abate. Cash interest payments are up 12.3% on an annual basis, down from 15% in Q2 and a peak annual growth rate of 25% this time last year. Annual cash interest paid as a percentage of total debt – a proxy effective interest rate -is still ticking up slightly for North American speculative-grade entities, to 5.3% from 5.1% last quarter, but tight spreads and supportive issuance continue to ameliorate rate pressure.
• Favorable margin trends are most apparent in the utilities, technology, and media sectors. Negative pressure is strongest in oil and gas, aerospace and defense, and transportation.
• Shareholder buybacks and dividend growth are growing again. Capital expenditure growth has been slowing sharply but is seeing an acceleration in North America while seeing weakening growth elsewhere.
• Transcript sentiment analysis shows a widening of the already substantial gap between more optimistic North American companies and their gloomier peers in Asia-Pacific and Europe.

13. Corporate Japan's Thirst For Acquisitions Risks Creditworthiness, Nov. 27, 2024

• Japanese companies are likely to seek growth opportunities through large overseas acquisitions.
• Financial burdens associated with acquisitions could harm creditworthiness, as companies are making larger acquisitions.
• Acquisitions will come with integration risk.

14. Korean Corporate Credit Trends: An Uphill Climb In 2025, Dec. 2, 2024

• Credit trends are more unfavorable heading into 2025, with a skew toward a negative outlook. Soft domestic demand, unfavorable demand-supply for cyclical sectors, and policy uncertainties are causing an unfavorable operational backdrop for many companies. EV battery makers, steel, and chemical companies are under most downward pressure.
• Operating performance by sector will differ and affect rating headroom. EV battery makers will face challenges, with a slowdown in EV demand growth persisting into 2025. Steel and chemical companies are exposed to weaker prices, due to increasing supply from China. Auto original equipment manufacturers (OEMs) will likely show resilience, despite tougher operating conditions. AI demand will likely continue to fuel strong demand for HBM semiconductors.
• Some key credit-monitoring factors over next 12 months: Supply and demand conditions from China could affect prices and margins for chemical and steel players. The ability to flexibly cut investments could affect credit metrics, amid weaker demand. Policy-related uncertainties will be another important swing factor.

15. Mexico's Corporate Sector Faces Low Refinancing Risk Of Near-Term Maturities , Nov. 28, 2024

• We expect low refinancing risk for Mexican corporate entities in the near term, as investment-grade rated companies face most of the upcoming maturities.
• Despite higher borrowing costs than in 2021, we do not expect significant changes in corporate interest coverage ratios after refinancings.
• We see a significant rise in domestic-currency debt as a share of total debt to further improve corporate capital structures, while interest rates decrease, and to avoid the volatility in foreign-exchange denominated debt.
• We forecast a lower likelihood of additional debt for capital expenditure (capex), as growth investments were performed in the past couple of years while the potential tightening in financial conditions increases the downside risk in forecasted growth due to trade-related uncertainty.

Credit trends and market liquidity

16. Default, Transition, and Recovery: The Asia-Pacific Speculative-Grade Default Rate Could Rise To 1.5% By September 2025, Dec. 9, 2024

• We project a speculative-grade corporate default rate of 1.5% for Asia-Pacific through September 2025, up from the current rate of 0% but well below the long-term average default rate of 3.1%.
• It's likely default activity over the next 12 months will come down to issuer-specific reasons rather than anything at a macroeconomic or sector level.
• We expect economic growth in the region to slow marginally this year and next, and China's slower growth ahead could be a drag on the rest of the region, if not globally.
• If any stressors--such as China's slowing property sector and spillover effects, a likely increase in global tariffs and trade restrictions, and the impact of years of tight monetary policy in the U.S.--become more severe, the default rate could rise to 2.5%.

17. Default, Transition, and Recovery: Defaults On Track To Close The Year Below 2023 Levels, Dec. 11, 2024

• The monthly global corporate default count fell to 12 in November, from 14 in October. The total number of defaults reached 135, compared with 141 in 2023 and the five-year average of 128.
• Europe is the only region globally where year-to-date default numbers increased, compared with the same period last year. Yet the pace of defaults in Europe is stabilizing, with an expected decline in the trailing 12-month default rate to 4.25% by September 2025.
• The media and entertainment, consumer products, and health care sectors continue to account for most defaults. Distressed exchanges, which led to 50% of defaults in November, remained the primary cause of defaults in the previous month and year to date.
• Defaulted debt totaled $16 billion in November, the second-highest amount since March 2024.

18. This Month In Credit: Conflicting Signals, Nov. 27, 2024

• Investment-grade downgrades rose to 11 in October, surpassing nine in all of the third quarter, driven by U.S. office REITs and actions related to the downgrade of the Israel sovereign.
• The speculative-grade outlook is improving. Negative bias for issuers 'B-' and below has fallen in nine of the last 10 months and is down nearly six percentage points compared with this time last year. Weakest links continued to fall in October, although 71% were due to defaults or rating withdrawals.
• U.S. defaults reached 11--their highest monthly count since May 2023. S&P Global Ratings Credit Research & Insights expects the U.S. and European trailing-12-month speculative-grade corporate default rates will decline slightly to 3.25% and 4.25%, respectively, by September 2025.

19. Default, Transition, and Recovery: 2023 Annual Mexican Structured Finance Default And Rating Transition Study, Dec. 11, 2024

• The Mexican structured finance national scale ratings default rate remained at 0% for the second consecutive year in 2023.
• The upgrade rate increased significantly to 13.2% in 2023 from 0.0% in 2022. Meanwhile, the downgrade rate nearly tripled to 7.5% in 2023 from 2.9% in 2022.
• All four downgrades in 2023 came from the residential mortgage-backed securities sector, while the seven upgrades were mixed among the commercial mortgage-backed securities, residential mortgage-backed securities, and asset-backed securities sectors.

20. Default, Transition, and Recovery: 2023 Annual Mexican National Scale Corporate And Public Finance Default And Rating Transition Study, Dec. 11, 2024

• Among Mexican national scale (CaVal) ratings in 2023, there was one corporate default, down from three in 2022, alongside two public finance defaults--the first since 2013--after Los Cabos defaulted twice.
• The corporate upgrade rate was 4.3% in 2023, down from 8.6% in 2022, while downgrades rose to 3.4% from 3.1%. There was 0.8 downgrade per upgrade, lower than the historical weighted average of 2.7.
• Public finance upgrades rose to 32.4% from 17.9% in 2022, while downgrades rose to 2.9% from 2.6%.
• At the start of 2024, 98% of CaVal corporate ratings were investment-grade, up from 96% to start 2023, while public finance was 91% investment-grade, down from 100% at the start of 2023.

21. Default, Transition, and Recovery: The U.S. Leveraged Loan Default Rate Is Set To Fall To 1% By September 2025, Nov. 28, 2024

• We expect the U.S. leveraged loan default rate to fall to 1% by September 2025, from 1.26% in September 2024. Lower benchmark interest rates will mean lower funding costs, and this will benefit issuers' coverage ratios and free operating cash flows.
• Favorable financing conditions this year have enabled borrowers to refinance most of next year's maturities, further reducing default risk.
• While default risk over the next 12 months appears to be moderating, the prospect of policy shifts on tariffs, trade, and immigration heighten uncertainty. In our pessimistic scenario, we project that the leveraged loan default rate will nearly double (to 2.5%).

Cross sector

22. Asia-Pacific Credit Outlook 2025: Cutting Through The Noise, Nov. 13, 2024

• A noisy backdrop. U.S. President-elect Donald Trump's historic win will color Asia-Pacific's credit landscape. While still unknown, prospective trade and foreign policy could renew tensions between the U.S. and China, and that may hit trade-oriented Asia-Pacific. The region's issuers will be tested as they navigate more policy and market volatility through 2025.
• More complications. Higher trade tariffs on China's imports to the U.S. will hit China's export growth and exacerbate deflationary pressures. Although authorities' recent measures have provided some relief for property sales and prices, a large glut remains in lower-tier cities. Pressure on downstream sectors, such as building materials, construction and metals, remains tight. Meanwhile, contained stimulus by Chinese authorities underlines discipline.
• Uncertainty abound. Trade and immigration policies by the upcoming U.S. administration could undo disinflationary momentum in the U.S. Should the Fed slow the pace of monetary easing, Asia-Pacific's central banks could follow suit amid concerns on capital outflows. All-in financing costs may stay elevated, hitting credit headroom. Furthermore, weaker home currencies could tilt borrowers back to onshore funding channels.
• Deteriorating net outlook bias. Entering 2025, the net rating outlook bias for Asia-Pacific issuers slipped to negative 3% as of end-October (August 2024: negative 2%). The chemicals, real estate, building materials and retail sectors have the largest negative outlook percentages. With the credit landscape remaining nuanced, a wedge between winners and losers is widening. Volatility is set to rise amid compounding headwinds from geopolitical tensions and financing challenges.

23. Emerging Markets Monthly Highlights: Rising Protectionism Will Challenge Resilience, Dec. 11, 2024

• We expect rising trade protectionism among major economies to hurt GDP growth in most emerging markets (EMs), though its impact will depend on policy specifics. Trade diversion and potentially tighter rules of origin are two factors that could influence macroeconomic conditions in EMs in 2025.
• U.S. protectionism will weigh on EMs' credit conditions. However, we expect falling interest rates and steady, albeit slower, economic growth to provide resilience. Yet, higher-than-expected tariffs on China or broader levies are important downside risk for growth and financing conditions in EMs.
• We expect EM central banks to adopt a more cautious stance, but monetary easing will continue. We forecast 100 basis points (bps) of policy rate cuts on average for EMs in 2025, which should support financing conditions. Brazil is the exception, where more interest rate hikes are likely in the coming months due to rising inflation.
• EM benchmark yields displayed a downward trend in the month, with tight corporate spreads at low historical levels. However, U.S. political elections bring downside risks to financing conditions, mostly linked to the risk of higher inflation and interest rates. Issuance volume (excluding from China) was relatively low in November, despite record levels year to date.

24. Blockchain Meets Covered Bonds, Nov. 28, 2024

• Digital Pfandbrief issuances by Germany-based Berlin Hyp AG and Natixis Pfandbriefbank AG in August 2024 have sparked discussions about integrating blockchain technology in covered bond issuances.
• The recent issuances are part of a cautious trend in 2024 toward digital bond issuances across different sectors, driven primarily by pilot schemes run by the Swiss National Bank (SNB) and the European Central Bank (ECB).
• These schemes aim to test the use of distributed ledger technology for the settlement of wholesale transactions in central bank money. So far, the focus is on the digitalization of the primary issuance process rather than secondary markets.

25. Credit FAQ: Sheinbaum's Agenda And Looming Changes In U.S. And Mexico Relations, Dec. 11, 2024

• During the first two months of the Sheinbaum administration, Mexico's Congress approved amendments to revamp the judicial system and to limit the ability to challenge future constitutional amendments.
• Congress also revised the status of Petroleos Mexicanos (PEMEX) and Comision Federal de Electricidad (CFE) back to public companies.
• In addition, Donald Trump was successful in his bid to return to the White House for a second term. Here, S&P Global Ratings presents frequently asked questions from market participants regarding the impact of these events on the sectors that we follow.

Cyber

26. Cyber Insurance Market Outlook 2025: Cycle Management Will Be Key To Sustaining Profits, Nov. 27, 2024

• Annual cyber insurance premiums are likely to increase by 15% to 20% per year to a total of about $23 billion by the end of 2026, up from about $14 billion at the end of 2023.
• Both the cyber primary insurance and reinsurance markets currently have solid margins, supporting S&P Global Ratings' view that the global cyber insurance industry is stable, despite growing competition and the increasing sophistication, severity, and frequency of cyber incidents.
• Cyber insurers will help guide policyholder refinements to their cyber security frameworks over the next two years, while ensuring concise policy wording and pursuing selective rate-adjustments to preserve adequate margins.

Economics

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

• 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.

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

• 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.

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

• 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.

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

• 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.

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

• 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.

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

• 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.

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

• 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

34. Sustainability Insights: Five Takeaways From COP29: Finance Remains A Thorny Issue, Nov. 26, 2024

• Amid estimates that climate finance needs in nationally determined contributions (NDCs) total $455 billion-$584 billion per year, the previous collective goal of $100 billion annually was tripled.
• Expect more, higher-quality transactions in the carbon market.
• Despite the urgent need for funding to address climate change, the adaptation finance gap is widening.
• The need to measure the impacts of sustainable finance (including on society), while recognized, was not universally supported.
• NDCs and NAPs may serve as a yardstick for the impact of COP29.

Financial institutions

35. EMEA Financial Institutions Monitor 1Q2025: Managing Falling Interest Rates Will Be Key To Solid Profitability, Dec. 9, 2024

• S&P Global Ratings expects the performance of financial institutions in Europe, the Middle East, and Africa (EMEA) to remain broadly stable in 2025 thanks to supportive fundamentals.
• We think that most banks across EMEA will maintain adequate profitability, solid liquidity, and sound capitalization throughout 2025, given our cautiously positive macroeconomic outlook.

36. Central And Eastern Europe Banking Outlook 2025: Economic Recovery Supports Banks’ Solid Performance, Dec. 12, 2024

• Most of our Central and Eastern Europe (CEE) sovereign ratings carry stable outlooks, underpinned by our expectation of strengthening GDP growth, contained balance-of-payment risks, ongoing disinflation and monetary easing, and moderate government debt.
• However, the potential escalation of trade and geopolitical tensions under the incoming U.S. administration clouds the macroeconomic outlook.
• Sovereign credit risks in CEE include weaker GDP growth in the eurozone than we expect, higher geopolitical uncertainty, subdued EU fund inflows, fiscal complacency, and monetary policy missteps.

37. Credit FAQ: Global Banking Outlook 2025: The Case For Cautious Confidence, Dec. 4, 2024

• Despite wars, simmering trade tensions between the world's two largest economies, and likely big policy shifts with the incoming Trump administration, banks' creditworthiness should be steady in the year ahead.
• S&P Global Ratings believes that stabilizing economies, amid a well-managed reduction in inflation, will support banks' performance.

38. Banking Brief: Complicated Shareholder Structures Will Weigh On Italian Bank Consolidation, Dec. 4, 2024

• UniCredit's offer for Banco BPM is the latest chapter in Italy's stop-start banking consolidation, though hopes of wider consolidation remain complicated by obstructive shareholder structures.
• A successful bid would narrow the gap between UniCredit, Italy's number two bank, and its larger domestic rival Intesa Sanpaolo, which strengthened its hold on the top spot with its 2020 purchase of Union di Banche Italiane, then Italy's fourth largest lender.
• Intesa's deal had been expected to prompt a surge in deals, though that failed to materialize in part due to strategically defensive holdings in mid-sized banks by insurance companies and bancassurance agreements, which S&P Global Ratings expects will continue to complicate hostile bids for Italian banks.

39. Nordic Banks: Resilient Profitability And Ample Capitalization Continue To Support Financial Performance, Nov. 27, 2024

• Top-tier Nordic banks demonstrated continued solid financial performance in the first nine months of 2024, with resilient net interest income and a renewed cost focus.
• We forecast banks' profitability will remain robust but start declining in tandem with policy rates over 2025-2026.
• Solid cost efficiency and robust credit quality will, alongside gradually recovering loan growth, continue to support earnings generation.
• Ample capital remains a strong buffer against downside risk.

40. U.S. GSIBs Q3 2024 Update: Results Remain Solid Amid Political, Economic, And Regulatory Uncertainty, Dec. 4, 2024

• Net interest income (NII) has largely stabilized but may fall modestly in 2025 as asset yields drop more quickly than funding costs, unless earning asset growth accelerates.
• With caution about the economy and uncertainty on the stringency of final Basel III regulation, we think some GSIBs will maintain current capital levels. Others with more significant excess capital may pick up the pace of share buybacks. Consequently, we expect capital distributions will vary across GSIBs.
• We expect delinquencies and charge-offs to gradually rise, driven especially by commercial real estate (CRE), commercial and industrial, and credit cards. However, an economic soft landing, if achieved, should prevent a substantial decline in asset quality.
• Deposits grew in the third quarter, and the shift in deposit composition continued but at a more measured pace. We expect limited deposit growth in 2025, but this will hinge on the Federal Reserve (Fed)'s monetary policy.

Healthcare and pharmaceuticals

41. Off-Patent Pharmaceuticals: Continuous Growth Defies Intensifying Competition, Dec. 6, 2024

• We anticipate stable rates of profitable growth in the off-patent (generic) medicines industry, averaging 3%-5% per year. Volume growth is underpinned by increasing needs for widely accessible therapies as governments seek to reduce the overall healthcare burden, while coping with aging populations and chronic disease management. Price erosion has started to moderate, especially in the U.S., as regulatory action and competition in the industry have reached a more sustainable level.
• Competitive pressures will persist with volume expansion as lower-cost manufacturers increase capacity. Chinese and Indian manufacturers already have large active pharmaceutical ingredients (API) capabilities and will continue pursuing the development of generic medicines across all viable geographical markets.
• On the therapy side, volume and value growth prospects are well supported over the medium term by upcoming steep patent cliffs. Large blockbuster drugs, such as Merck Inc.'s Keytruda in oncology, will gradually come off patent by 2030, providing attractive opportunities for off-patent drug companies.
• Off-patent medicine companies that focus on and invest in higher-value-add medicines will benefit from higher profitability and higher barriers to entry. Complex generic drugs, such as biosimilars and value-add formats (steriles and injectables), have a competitive advantage but require significant investments in manufacturing capabilities.
• The regulatory landscape remains complex, which creates fragmentation in the uptake of off-patent drugs across markets. Strong knowledge and relationships with local authorities are crucial to ensure the successful development of more complex products and their timely launch to market.

42. The Health Care Credit Beat: Republican Red Wave A Net Negative For Health Care, Dec. 02, 2024

• Health care was not a major campaign issue in this past U.S. election, and neither Republicans nor Democrats provided many details about their plans for health care.
• Now, with a Republican sweep in the White House and in both houses of Congress, President-elect Trump has, at least in the next two years, significant ability to potentially influence U.S. health care.
• While we do not expect a major ratings impact for health care companies over the near to intermediate term, we believe any changes will be a net negative for the industry from a credit perspective.

Infrastructure

43. Is Europe Ready for a Nuclear Renaissance?, Dec. 9, 2024

• From the current limited nuclear power construction activity, with about 3 GW in progress, Europe seems ready to accelerate again, but only in countries already operating nuclear reactors. This comes amid increased geopolitical tensions, energy security concerns, aging existing nuclear fleet and increased need for firm and low carbon power to deliver on electrification and decarbonization ambitions.
• We estimate that the total cost for new build could be up to €15 million/MW, well above most other clean energy sources. This estimation notably considers overnight costs, cost of capital, and time — all of which can result in significant variations and add to unpredictability.
• We believe the economics of the projects and the credit quality of the involved utilities will therefore rely on the efficiency and credibility of the frameworks that will govern these assets. Economic viability depends on dedicated remuneration schemes, risk-sharing mechanisms and government support. The need for robust frameworks is exacerbated by the substantial upfront investment funding needs of each project and a negative track record of significant time and cost overruns we observed on recent projects.
• In any case, any nuclear new build will take years to become operational and connect to the grid, creating ongoing tensions on projected economics and future power market dynamics. Managing these will be key to attract investors while protecting consumers.

44. European Airports Sector Update: Is It Time To Start Spending Again?, Dec. 5, 2024

• We expect the credit quality of European airports to remain sound on the back of the industry's strong business fundamentals and recurring cash flows. However, higher indebtedness still poses a challenge for most airports, especially given the resumption of investments and shareholder returns.
• Ratings upside is possible for airports whose credit metrics are improving on robust traffic, favorable tariff regulations, manageable capex plans-- and, ultimately, accommodating their debt structures to the post pandemic environment.
• The evolution of the ratings will mainly depend on each airport's financial discipline to cope with peak-capex and higher shareholders compensation in a scenario where the rated sector's debt leverage has increased by 20% in the past few years.
• Europe's initiatives on CO2 emissions could result in restrictions on capacity and lower passenger growth. Most vulnerable are regional airports relying on short-haul flights that can be replaced by rail journeys as mobility transition gains traction.
• Geopolitical tensions in Europe (Russia-Ukraine) and the Middle East could curb leisure traffic to some tourist destinations, and lead to redirected routes to or from Asia-Pacific. At this stage, the overall portfolio impact is limited.

Insurance

45. Highlights From The European Insurance Conference 2024, Dec. 02, 2024

• Capital remains a key rating strength for European insurers, who benefit from a favorable funding environment and healthy capital adequacy levels.
• Preparing for climate risk is teamwork and represents a joint exercise between insurers and policymakers. Insurers cannot shoulder the burden of managing risks arising from climate change alone, a panelist said.
• Insurers have some catching up to do to meet customer expectations, not least since one bad customer experience can tar the entire industry, panelists warned.

46. Saudi Insurers Must Maintain Underwriting Discipline In 2025, Dec. 10, 2024

• We expect our ratings on Saudi insurers will remain stable in 2025. This is in line with our ratings outlook, which is stable for all rated insurers in Saudi Arabia.
• We forecast that top-line growth in the sector will moderate to about 10%-15% in 2025, after strong growth since 2022 and a 17% increase in insurance revenue in third-quarter 2024, compared with third-quarter 2023.
• The sector's net profits increased in third-quarter 2024, compared with the same period last year. Larger players account for a higher share of these profits, while smaller companies' profits are decreasing.
• Stiffer competition, particularly in motor third-party liability, and further declines in interest rates could exert pressure on insurers' earnings and capital adequacy in 2025, with investment returns making up nearly two-thirds of insurers' net profits in third-quarters 2023 and 2024 (investment returns in third-quarter 2024 exclude Al Rajhi Takaful's fair value gains on unit-linked investments and Saudi Re's one-off gain on sale of its investment in an equity accounted investee).
• Due to increasing regulatory requirements and some insurers' inability to meet their minimum capital requirements, we expect M&A activity will continue in 2025. Eight players are currently engaged in discussions.
• Despite geopolitical tensions, our base-case scenario assumes that the Israel-Hamas war will remain contained.

Leveraged finance

47. Market Insights: Sector Intelligence | Leveraged Finance: European Summary Report, 2024, Nov. 27, 2024

• Speculative-grade bond issuance is up 90.5% as of Oct. 31, 2024, a departure from fairly subdued activity in 2023. We rate nearly 60% of this issuance 'BB-'. The increase reflects central bank clarity on rates, corporations' ability to defend their robust operational performance, and market participants' expectations of a soft landing.
• Issuers rated 'CCC+' and lower saw more negative rating actions in third-quarter 2024 than in the previous quarter. This indicates heightened refinancing, liquidity, and default risks, and highlights the volatility and vulnerabilities in this rating category.
• We expect the European trailing-12-month speculative-grade corporate default rate to drop to 4.25% by September 2025 from 4.7% in September 2024. The rate remains elevated due to a rise in the number of distressed exchanges and debt restructurings. Overall credit trends remain supportive, but issuers rated 'CCC/C' still face limited access to the primary market and sizable debt maturities.

48. Leveraged Finance | North American Sector Recoveries: Actual 1L Debt Recoveries Trend Down; Significant Drops In Some Sectors, Dec. 11, 2024

• Debt recoveries for 1L creditors of S&P Global Ratings-rated issuers that exited bankruptcy have declined over the past 6.25 years, driven by companies facing: High leverage; Low junior debt cushions; and Low plan valuations.
• Further pressure from company- or sector-specific factors curtailed rebound and growth expectations for companies exiting bankruptcy.
• The high interest rate and high inflationary environment of the last three years played a part in lower valuations, as did more conservative exit capital structures.
• Over the past 16.25 years (2008-Q1 2024), issuer bankruptcies were concentrated in: Oil and gas (O&G); Media and entertainment; and Retail/restaurants.
• For the interim period (a five-quarter period from 2023-Q1 2024),retail/restaurants retained a top 5 spot. Other sector concentrations shifted to: Health care; Infrastructure; Consumer products; and Technology.
• The top 5 interim sectors aggregated to 67% of companies for the period.

Private markets

49. Regulators Eye Private Debt Boom In Europe, Dec. 5, 2024

• The fast growth in private credit (PC) represents a new wave of financial disintermediation in Europe and increases diversification and funding capacity for the economy.
• Yet the rapid expansion and innovation in the private finance sector bear new financial stability risks centered on complexity, liquidity, and leverage.
• Increasing transparency will be key to sustain investor and public confidence in the sector.

Public finance

50. Not-For-Profit Higher Education Outside Of The U.S. Outlook 2025: Credit Stability Amid Market Turbulence, Dec. 6, 2024

• S&P Global Ratings believes that rated public not-for-profit universities outside of the U.S. are well situated in their markets and will sustain sufficient liquidity to support generally stable credit profiles in 2025.
• However, government policies stemming the inflow of international students will reduce revenue in the near term and threaten to harm the international reputation of affected institutions over the longer-term.
• We expect that downside risks will continue to outweigh revenue opportunities in 2025, with the potential to erode financial cushions and highlighting the need for management teams to take effective action to limit the impacts on operating performance.

51. Australian Universities: Collapse Of Student Caps Bill Offers Little Respite, Dec. 10, 2024

• We expect the Australian government will seek another way to curb the flow of international university students following the failure to pass a bill capping international student numbers at a provider level.
• We think the government will continue to face pressure to limit migration, which it views as a factor driving up living costs for Australian households, especially through increasing rents.
• We believe new measures could include changes to the current Ministerial Direction 107. We expect changes will continue to limit international student flows while striving to distribute the burden on universities more equitably.
• Lower numbers of international students and reduced fee revenue could weaken enterprise profiles and operating margins, leading to increased ratings pressure.

52. Five Takeaways From U.S. Public Finance In 2024: Uneven Credit Trends Emerge Amid Rising Uncertainty, Dec. 9, 2024

• Better-than-expected growth stabilized ratings across most sectors.
• Some sectors saw persistent bifurcated credit quality and others showed signs of weakening.
• Evolving risks--climate, cyber, and crypto--continued to test management teams.
• Heightened affordability issues could begin affecting domestic migration trends.
• Demographics will be a megatrend that could have more credit impact in 2025.

53. Market Insights: Sector Intelligence | U.S. Public Finance, Dec. 9, 2024

• There have been more than 2,080 rating actions in U.S. public finance (USPF) year-to date through Nov. 30, 2024.
• Overall, upgrades outpaced downgrades, primarily driven by rating activity in the local governments sector. Downgrades outpaced upgrades in the charter school, education, health care, power, and utilities sectors.
• Year-to-date, unfavorable outlook revisions exceed favorable outlook revisions.

54. U.S. Rated Not-For-Profit Retail Electric And Natural Gas Utilities: Sector Update And 2023 Medians, Dec. 9, 2024

• The median and modal ratings of NFP electric utilities are 'A+', consistent with recent years.
• The majority of NFP electric utility ratings are in the 'A' rating category and most outlooks are stable.
• There have been more downgrades than upgrades of NFP electric utilities in 2024.

55. U.S. Not-For-Profit Higher Education Outlook 2025: The Credit Quality Divide Widens, Dec. 6, 2024

• S&P Global Ratings' view of the higher education sector in the U.S. remains mixed for the third consecutive year. Our outlook is negative for highly regional, less-selective institutions that lack financial flexibility, but it is stable for institutions with broad geographic reach, steady demand, and sufficient liquidity and financial resources to navigate operating pressures.
• While enrollment declines and financial stresses likely will continue, these problems are not affecting all schools equally. Competition for students and operating expenses remain elevated, sustaining budget pressures for many, but these issues are most pronounced at the lower end of the ratings scale.
• Credit quality bifurcation has widened. Strong institutions hold their market position, excel at fundraising, and have healthy balance sheets while working to improve operating margins; struggling schools face enrollment declines, leading to strained operations and, often, liquidity issues. Industry headwinds and a new federal administration with different priorities could create additional obstacles.

56. U.S. Not-For-Profit Acute Health Care 2025 Outlook: Stable But Shaky For Many Amid Uneven Recovery And Regulatory Challenges, Dec. 5, 2024

• Good revenue and demand for services, easing of certain labor-related and inflationary expenses, and generally sound balance sheets support S&P Global Ratings' stable outlook on U.S. not-for-profit acute health care providers. This is translating to outlook trends that show signs of stabilization following a period of increased rating activity.
• Our stable outlook also incorporates a meaningful reduction in organizations with negative outlooks and far fewer negative outlooks among higher-rated categories. Although we will likely continue to see some negative bias related to credit activity in 2025, we expect the pace of rating changes will slow and could be more concentrated among lower-rated categories.
• That said, sector uncertainty persists as a subset of providers continues to work toward improved and stable cash flow, with likely increased capital investments in coming years. Industry headwinds and an incoming new federal administration could set new priorities and policies that may alter our view of credit quality for the sector.

Real estate

57. U.S. Office Real Estate Investment Trust (REITs) Portfolio: How Credit Stories Have Evolved, Dec. 12, 2024

• Elevated rates in the near term heighten refinancing risk, particularly for struggling property types and properties.
• Demand for retail, housing, and industrial assets remain resilient.
• Weak office fundamentals led to multiple downgrades year to date in 2024, and we maintain a negative rating bias for office REITs.
• Tighter access to capital could pressure liquidity.
• Expected rate cuts in 2025 could bring more transaction volume and price discovery while improving access to capital.

Retail

58. Retail Brief: China Heads For A Consumption Hangover, Nov. 28, 2024

• After a strong 2024, sales for key Chinese consumer categories are set to fall in 2025.
• China's subsidy program expires in December, putting an end to a mini consumer boom.
• The more effective the sales boost from the trade-in program this year, the bigger the hit on sales next year.

Sovereigns

59. Credit FAQ: Will Argentina's Economic Adjustment Be Different This Time?, Dec. 6, 2024

• The election of libertarian president Javier Milei in late 2023 has led to radical changes in Argentina, including a shift toward market-oriented economic policies designed to enhance stability, control high inflation, run a fiscal surplus, shrink the government, and deregulate many sectors.
• However, the country has undertaken many economic adjustment programs in the past without overcoming its long history of booms and busts, sharp changes in economic policies, and numerous debt defaults. Will it be different this time?

60. Sovereign Brief: Central American Sovereign Ratings On The Move, Dec. 3, 2024

• Sovereign credit ratings in Central America and the Dominican Republic are improving on stronger economic and external profiles.
• However, structural institutional and fiscal weakness will continue weighing on the relatively low credit ratings.

61. Global Sovereign Rating Trends Third-Quarter 2024, Oct. 21, 2024

• We rate 85 sovereigns in Europe, Middle East, and Africa (EMEA), 31 in the Americas and 21 in Asia-Pacific (APAC), i.e. total 137 rate entities.
• The largest rating category in the investment grade group is 'BBB', with 25 entities.
• There are seven entities with a negative outlook, and 20 with a positive outlook.

Structured finance

62. An Overview Of Australia's Housing Market And Residential Mortgage-Backed Securities, Nov. 28, 2024

• Arrears remain low, underpinned by low unemployment, property price growth, and savings buffers.
• State property price dynamics are diverging due to local economic factors, demographic trends, and property taxes, with downstream effects on investor and first-home owner participation.
• "Higher for longer" interest rates will add to debt-serviceability pressures, but most households should navigate the challenges if unemployment remains low.

63. European Structured Finance Outlook 2025: Up In The Air, Dec. 11, 2024

• Issuance: European securitization issuance looks set to remain high at €135 billion in 2025, given a broadening base of originators and sponsors, a better outlook for most areas of underlying lending, and rising market engagement from bank originators motivated by both funding and risk transfer requirements.
• Bank funding: The end of central banks' cheap term funding schemes will likely support continued growth in bank-originated securitization supply in 2025, especially in the U.K., where many loans mature near the end of the year. That said, recovering deposit growth will reduce banks' wholesale funding needs.
• Consumer: Inflation is almost back to target levels, policy rates are on the way down, and real incomes are rising. However, some pressure on collateral performance in consumer-related securitizations may persist for adverse credit borrowers and in sectors where rate rises are still feeding through to loan contracts.
• Corporate: For corporate-backed transactions, credit prospects are improving as financing conditions ease, and we expect that the speculative-grade corporate default rate will begin to decline in 2025. Commercial real estate continues to face refinancing risks, although property values have likely bottomed out.
• Ratings performance: Structured finance ratings have mostly weathered the effects of higher interest rates, remaining largely stable over the past year, especially at investment-grade levels.
• Regulation: 2025 could be a year when regulatory developments are unusually important for European securitization markets. Developments to watch include legislative proposals based on a recent European Commission consultation on the EU securitization framework, and the bloc's implementation of Basel 3.1.

64. Covered Bonds Outlook 2025: Lower rates, higher uncertainty, Dec. 6, 2024

• Lower rates will underpin asset and covered bond performance, but 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.
• In our base-case scenario, eurozone GDP will grow 1.2% in 2025, with Germany's GDP growth falling short of eurozone peers', while Spain will continue to outperform. We expect inflation to fall to 2.1% and the European Central Bank (ECB) to cut rates to 2.5% before midyear.
• Benchmark European covered bond issuance ebbed slightly in 2024 but remained close to recent highs. The drivers of new supply look slightly weaker in 2025, as scheduled covered bond redemptions remain flat and bank deposits bounce back while lending remains lackluster. We therefore expect European benchmark covered bond issuance of about €140 billion.
• House price corrections and increasing income have returned affordability to 2015 levels. Higher-for-longer mortgage rates are taking their toll on residential mortgage performance, but it remains strong thanks to tight labor markets. Easing interest rates and a return to growth will limit the risk of further deterioration.
• High interest rates, e-commerce, and working from home have produced unprecedented levels of stress in European commercial real estate (CRE). Some sectors now face market value declines that exceed those during the global financial crisis. While we believe that overall CRE asset performance will remain weak in 2025, the availability of significant excess credit enhancement remains a key strength for programs we rate.
• Our covered bond rating outlook remains stable, underpinned by the ample credit enhancement available to most of the programs that we rate and the presence of unused rating notches, both of which reduce the risk of downgrades.

65. Structured Finance: Risk Assessment Is Evolving With Cyber Threats, Dec. 6, 2024

• Structured finance is exposed to increases in the frequency and severity of cyber attacks, with loan servicers most commonly affected, though other transaction participants have also suffered.
• Securitizations have so far evaded cyber-incident-related losses due to a combination of structural features and luck, but issuers and key transaction parties with weak cyber security are exposed to greater risk.
• Potential liquidity issues resulting from a cyber event are the main concern, but an attack could increase credit risk too, and either factor could theoretically lead to negative rating actions.

66. A Primer On Hong Kong's Consumer Loan ABS Market, Dec. 5, 2024

• Providers of unsecured personal loans in Hong Kong generally consist of licensed money lenders registered at the Companies Registry and authorized institutions regulated by the Hong Kong Monetary Authority. These include banks, restricted-license banks, and deposit-taking companies.
• The number of lenders has been decreasing over the past two years. The drop in registered money lenders is more noticeable, at 3%-6% annually since 2021.
• A series of challenges have hit their business, such as COVID-19, Hong Kong's technical recession in 2022, along with pressure from lower interest rate caps.
• By mid-2024, unsecured personal loans in the market totaled HK$108.85 billion, while unsecured revolving loans amounted to HK$16.3 billion.

67. How Electric Vehicle Sales Growth Could Affect Japanese Auto ABS, Nov. 28, 2024

• An increase in the proportion of auto loans backed by battery electric vehicles in auto loan ABS transactions in Japan could affect the creditworthiness of the underlying pools of assets.
• Unlike hybrids and plug-in hybrid electric vehicles, the residual value of battery electric vehicles is lower than that of vehicles with internal combustion engines.
• The key challenges to battery electric vehicles maintaining higher residual value will include the limited number of battery electric vehicles in the used car market and uncertainties over battery life and obsolescence.

68. U.K. Legacy RMBS Arrears To Be Higher For Longer, Nov. 28, 2024

• Further U.K. interest rate cuts would reduce monthly instalments for existing borrowers on floating rates and should be positive for RMBS transactions backed by residential collateral. However, we don't anticipate a rapid material improvement in reported arrears.
• While borrowers refinancing from fixed rates would suffer lower payment shock, reduced monthly payments would also lead to a rise in arrears, given that months in arrears are generally calculated as arrears balance divided by monthly payment.
• If interest rates fall rapidly but collateral performance does not immediately improve, U.K. legacy RMBS transactions' common pro rata/sequential switch triggers may be breached, which may in turn affect payment priority.

69. ABS Frontiers: How The Burgeoning CLO ETF Sector Could Impact The Broader CLO Market, Nov. 27, 2024

• The CLO ETF market has grown to over $19 billion as of late November 2024 from $120 million in 2020, fueled in part by investor appetite for exposure to floating-rate debt in a rising interest rate environment.
• Individual funds can own substantial portions of CLO tranches. In the case of the largest player in the CLO ETF space, Janus Henderson's JAAA fund, this portion can be upwards of 90%. While most purchase activity across CLO ETFs occurs in the secondary market, primary acquisitions do take place, particularly with JAAA.
• CLO ETFs are likely contributing to the current spread tightening and liquidity of CLO tranches. For now, CLO ETFs are unlikely to exacerbate volatility in the case of a distressed CLO market because of the inherent decoupling between ETF investor share sales and CLO sales from the ETF's portfolio.
• If the CLO ETF market continues to grow at its current pace, it is possible that ETFs could increase CLO note price volatility in the case of a severe market dislocation.

70. SF Credit Brief: U.S. CMBS Delinquency Rate Rose 35 Basis Points To 5.6% In November 2024; Office Rate Is Nearing 10.0%, Dec. 10, 2024

• The U.S. CMBS overall delinquency rate rose 35 basis points month over month to 5.6% in November.
• Office loan delinquency rates are approaching their highest levels in our series, but they have not yet reached the all-time high of 10.2% in July 2012.
• By balance, delinquency rates increased for office (94 basis points to 9.7%), lodging (57 basis points to 5.9%), multifamily (71 basis points to 3.4%), and industrial (one basis point to 0.3%) loans and decreased for retail loans (36 basis points to 6.0%).
• Special servicing rates rose for office, multifamily, retail, and industrial loans and decreased for lodging loans.
• The share of loans that were either modified or extended decreased 34 bps month over month to 8.3%.
• Prior months' delinquency reports included commercial real estate collateralized loan obligation loans; this month and moving forward, we are excluding them.

71. A Review Of U.S. CMBS Exposure To U.S. General Services Administration's Office Leases Following Presidential Election, Dec. 10, 2024

• Given the speculation of potential spending cuts under the incoming Trump administration, we reviewed office space leased by the federal government, which totals some 150 million sq. ft.
• Some 52% of these leases either expire or can be terminated through the end of 2028.
• S&P Global Ratings has outstanding CMBS ratings on 45 transactions with exposure to office collateral leased to GSA and/or government agency tenants. Conduit exposure to the GSA appears mixed by transaction, but broadly limited, while some SASB transactions could be adversely impacted by potential future budget cuts.

72. U.S. Auto Loan ABS Tracker: October 2024 Performance, Dec. 9, 2024

• U.S. auto loan ABS performance varied for both prime and subprime sectors in October 2024. Annualized losses increased month over month despite improving recovery rates. Additionally, losses for both composites were higher than levels from one year ago and remained elevated compared to pre-COVID-19 pandemic levels.
• On a positive note, 60-plus-day delinquencies marginally declined month over month for both composites. On a year-over-year basis, they remained stable for the prime sector and declined for subprime. Thirty-day delinquencies for both sectors also showed improvement on a year-over-year basis.
• Extensions increased in October relative to September and from a year ago, as many sponsors provided accommodations to those impacted by Hurricanes Helene and Milton.
• S&P Global Ratings reviewed 17 transactions in November, which resulted in 24 upgrades, 43 affirmations, and no downgrades.

73. CLO Insights U.S. BSL Index: CLO Metrics Mostly Hold Steady; Upgrades Outpace Downgrades Across CLO Obligors Rated 'B' And Higher, Dec. 6, 2024

• Amidst an improving backdrop for leveraged loan issuers, speculative-grade rating actions have been trending more positively, and metrics across reinvesting U.S. collateralized loan obligations (CLOs) have mostly stabilized over the past year.
• Both 'B-' and 'CCC' category exposures have gradually declined from their highs, while defaults have remained modest and range bound.
• Over the past year, the average exposure to issuers with a negative rating outlook has declined to 13% from 18%, a two-year low and a good sign of decreasing stress.
• The proportion of broadly syndicated loan (BSL) CLO obligor ratings on with a negative outlook hasn't been this low since the start of fourth-quarter 2022.

Transportation

74. EMEA Corporate Transportation Investment-Grade Portfolio: How Credit Stories Have Evolved, Dec. 10, 2024

• Airlines: Government-imposed lockdowns and travel restrictions weighed heavily on air passenger traffic during the pandemic. Strict measures to contain costs, adjust capacity, and preserve cash were insufficient to cover revenue losses, and led to material cash outflows and increased debt. This resulted in downgrades of between one and four notches.
• Container shipping: Companies benefited from a surge in demand for tangible goods during the pandemic as consumers spent their money on goods rather than services during lockdowns. Increased online shopping orders and home working placed unprecedented demand on supply chains. This led to significant disruptions, which tied up containership capacity and materially increased freight rates.
• Postal: Firms benefited from soaring parcel-processing and delivery volumes during the pandemic, as retailers relied on e commerce distribution channels during lockdowns, resulting in strong free cash flow generation. However, operators have met considerable headwinds since, including a structural decline in letters, normalizing parcel volumes, and cost inflation. Recently announced acquisitions in the IG space could affect our ratings in the near term.
• U.K. bus: Operators saw a sharp decline in revenues during the pandemic due to containment measures causing a major reduction in passenger volumes. However, the industry received material government support to continue running its essential operations, which helped to reduce operating losses. The U.K. government's plan to renationalize the railways as train operating company contracts expire over the coming years is a material development for the sector. However, we do not expect an immediate effect on our ratings.
• Logistics: Companies performed relatively resiliently during the pandemic thanks to increased demand for e-commerce and supply chain management services. Disruption to global supply chains combined with air travel restrictions led to higher air and ocean freight rates.

75. Red Sea Rerouting Is Boosting Container Shipping Companies' Profits, Nov. 27, 2024

• Container shipping freight rates surged in 2024 to levels significantly higher than those in 2023 and above S&P Global Ratings' earlier forecasts.
• Rerouting away from the Suez Canal (due to attacks on commercial ships in the Red Sea), stronger-than-anticipated trade volumes, and port congestion have combined to support rates and offset record-breaking containership deliveries and the capacity they add.
• We now expect earnings at Maersk, CMA CGM, and Hapag-Lloyd to exceed our initial expectations for 2024, though we remain wary of significant additions of new tonnage continuing into 2025, when our base case anticipates a moderate decline in rates and normalization in container liners' EBITDA.

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