Results from LCD’s H1 2026 European leveraged finance survey point to a market that expects broad stability in credit fundamentals, even as sentiment remains fractured on the macro risks most likely to shape performance over the next six months.
Survey highlights: – Leveraged loans expected to outperform high yield in H2 2026. – After a sharp rise in the ELLI distress ratio, respondents see conditions stabilising. – European loan index predicted to outperform its US counterpart. – Triple-C loans expected to underperform other rating cohorts
With 60% of the vote, survey respondents expect the Morningstar European Leveraged Loan Index (ELLI) to outperform the Morningstar LSTA US Leveraged Loan Index over the next six months. At the year-end 2025 poll — taken before the mass unwinding of software risk took hold — respondents had broadly expected the US benchmark to outperform Europe, which it did in the first quarter. As AI fears gripped the markets, however, the software-heavy US index recorded a year-to-date return of 1.32% at the end of June, versus 1.82% for the European index.
Respondents strongly favour floating-rate risk over high yield bonds for the second half, with 80% expecting loans to outperform high yield. This preference comes as markets remain uncertain over the future path of central bank rate cuts, keeping the floating-coupon carry advantage offered by loans intact. Funding landscape As for pricing, a clear majority of respondents (80%) expect European credit spreads to stay broadly unchanged over the next six months, with the remaining 20% anticipating moderate widening.