Hedging Credit in 2026
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Investment-grade (IG) credit spreads have compressed to their tightest levels in two decades, even as all-in yields remain elevated — a divergence that is reshaping how investors think about hedging. We compare two approaches to hedging U.S. IG credit risk, CDX plus Treasury futures versus cash-settled credit-index futures, across three historical regimes, including the March 2020 liquidity crisis, and examine how AI-capex-driven bond issuance is concentrating composition risk within the benchmark.
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