Liquidity is a drug.
Corporate America is currently overdosing on it. On November 13, 2025, the latest 10-year Treasury yield hovered at 4.32 percent, yet corporate credit spreads remain defy logic. Anshul Sehgal, the global co-head of Fixed Income, Currency, and Commodities at Goldman Sachs, recently argued that we are entering a period of significant credit expansion. He points to the resilience of the private credit market and the strategic re-leveraging of investment-grade balance sheets. But the raw data from the last 48 hours suggest this expansion is not a rising tide for all boats. It is a concentrated surge in high-risk synthetic instruments.
The Sehgal Thesis vs. Reality
Sehgal’s optimism centers on capital-efficient solutions. He suggests that banks are successfully offloading risk to private lenders. However, the bond market data from November 14, 2025, shows a widening gap between what Goldman Sachs calls expansion and what the secondary market calls distress. While investment-grade spreads are tight, the CCC-rated tranche has seen a 45 basis point spike in just the last week. This is not expansion. It is a bifurcation of the credit cycle.
Visualizing the Spread Compression
The Technical Mechanism of Synthetic Risk Transfers
The expansion Sehgal references is largely driven by Synthetic Risk Transfers or SRTs. These are complex derivatives where banks pay private investors to take on the first-loss risk of their loan portfolios. This allows banks to lower their capital requirements without actually selling the underlying loans. According to Reuters market reports, the volume of SRTs has reached a record 180 billion dollars as of mid-November 2025. This creates an illusion of a healthy balance sheet. In reality, it pushes systemic risk into the shadows of the unregulated private credit sector. Traders are currently using these transfers to mask the rising default rates in commercial real estate loans, which have crept up to 6.4 percent this quarter.
Strategic Rotations in a High-Rate Environment
Trading strategies must evolve beyond the generic advice of staying vigilant. The current data demands a surgical approach to sector rotation. Financials are no longer a monolith. While large-cap banks benefit from the SRT fee machine, regional lenders are suffocating under the weight of unrealized losses on their hold-to-maturity securities. The latest SEC filings from early November reveal that mid-tier banks are seeing a 12 percent year-over-year decline in loan originations, directly contradicting the expansion narrative.
Corporate Debt Maturity Schedule
The following table outlines the looming maturity wall that will test the validity of the credit expansion thesis in the coming months.
| Debt Tranche | Amount Due (Billions) | Avg. Current Coupon | Projected Refinance Rate |
|---|---|---|---|
| Investment Grade | $450 | 3.8% | 5.6% |
| High Yield (BB/B) | $320 | 5.2% | 8.9% |
| Distressed (CCC) | $95 | 8.1% | 14.5% |
The 2026 Milestone
The credit expansion narrative faces its ultimate test on February 15, 2026. This date marks the largest single-day maturity reset for B-rated corporate bonds in the current decade. If the Federal Reserve does not initiate a series of aggressive cuts before this window, the cost of debt service for these firms will nearly double. Watch the spread between the 2-year Treasury and the 10-year Treasury throughout December 2025. A deepening inversion at the end of this year will be the final signal that the credit expansion Sehgal celebrates is merely a temporary bridge to a massive 2026 restructuring cycle.
