Heading into summer: strong demand meets fewer new issues

We have deployed more of the fund’s cash ahead of the summer. Our decision reflects a supportive backdrop for credit markets, with sustained demand meeting a seasonal decline in new bond supply.

A quieter primary market

The Swedish credit market saw a very active first half of the year, with record issuance volumes. Primary market activity is usually much quieter in July and August.

Meanwhile, capital continues to flow into credit funds, and relatively high coupon payments provide investors with cash to reinvest. Together, these factors point to demand outstripping the seasonally limited supply.

A supportive seasonal pattern, with no guarantee

Credit spreads have historically tended to tighten over the summer. Over the past ten years, the spread on the European iTraxx Crossover credit index has narrowed by an average of around 15 basis points between 1 June and 31 August.

The clearest exception was the summer of 2022, when accelerating inflation and rising interest rates drove spreads wider. Inflationary pressures remain a source of uncertainty this summer, so the historical pattern must be assessed in the context of current market conditions.

iTraxx Crossover

Credit spread on 1 June vs 31 August (bps), 2016–2026

Start (1 June)End (31 August)

We see few reasons why the historical pattern of summer spread tightening should not repeat in 2026. As discussed above, demand remains strong, while new bond supply is again expected to be seasonally low.

More capital invested, with room to adjust

Taken together, these conditions could support further spread tightening over the summer months. We have therefore invested more of the fund’s cash.

The fund’s structure allows us to maintain a concentrated portfolio while adjusting tactical exposures quickly as market conditions change.

Mercurius Credit Fund returned +0.51 % in June, taking its first-half return to +2.60 % and its trailing twelve-month return to +4.50 %. Volatility since inception stands at 1.40 %.

Further details on the fund’s positioning, performance and analysis are available in the June monthly report, published in Swedish. Please contact me or Andreas Olsson if you would like to receive the report or discuss the credit market.