3 reasons to own hybrid credit

Hybrid credit offers an attractive buying opportunity because it combines AI-linked utility growth, income premia and strong bank and insurer fundamentals.

• AI-driven data-center electricity demand is expected to lift utility regulated capital expenditure growth from approximately 6% in 2025 to 9% in 2029, supporting higher hybrid issuance and improving utility fundamentals.
• Hybrids offer additional income in a tight credit-spread environment, with a 72-basis-point premium over investment-grade corporate bonds for BBB-equivalent debt.
• BB-equivalent hybrids trade at only a 5-basis-point discount to BB high-yield bonds, indicating that their income advantage is not limited to investment-grade comparisons.
• Hybrid issuers across banks, insurers and utilities continue to show strong fundamentals; global systemically important banks have robust capital levels, profitability and asset quality.
• Core capital ratios for major U.S. and European banks were assessed as of 30 June 2026, while the credit-spread comparisons were measured as of 30 September 2026.

Takeaway: Investors seeking income and exposure to utility, banking and insurance credit may find hybrids compelling, although the historical and forecast relationships are not guaranteed to persist.