Greetings,

Inflationary pressures on US services firms reached their highest point in four years in March 2026, largely due to the impact of the Iran war on energy costs, as elevated prices take a toll on firms' purchasing power across sectors. See the coverage below.

Also in this edition:

• High-yield bonds might be more resilient than they seem
• Dimon warns credit losses may exceed expectations
• Fed survey: Iran war raises inflation expectations
• Moody's changes private credit outlook to negative

US services firms faced the highest inflation in four years last month as the war in Iran drove up energy prices, according to the Institute for Supply Management. The prices index rose to 70.7 from 63, the largest one-month increase in 13 years. Despite this, the services industry remained in expansion, with the overall index at 54. However, employment in the sector contracted, with the employment index dropping to 45.2 from 51.8.

High-yield bonds have been sold off alongside other risky assets this year, but investors should not treat them the same as leveraged loans. High-yield bonds have a different sector composition, with more exposure to energy and basic industries, potentially making them more resilient to market disruptions. While default rates for high-yield bonds and leveraged loans have converged recently, JPMorgan Chase expects the default rate for leveraged loans to rise faster than for high-yield bonds in the coming years.

JPMorgan Chase CEO Jamie Dimon warns that losses for lenders exposed to highly indebted companies could be higher than expected due to weakening lending standards. In his annual letter to shareholders, Dimon cited aggressive assumptions about future performance, weaker covenants and increased use of payment-in-kind as examples of deteriorating standards. Dimon also discussed broader economic issues, noting the resilience of the US economy amid global uncertainties and potential shocks from geopolitical tensions.

US consumers' inflation expectations for the next year jumped to 3.4% in March 2026, according to the New York Fed's survey, marking the sharpest monthly increase in a year. The rise was driven by anticipated spikes in gas and food prices, as households reacted to the onset of war in the Middle East. Expectations for gas prices rose notably, with respondents predicting a 9.4% increase over the next year, while food costs were expected to climb by 6%. The survey underscores growing consumer concerns about inflation remaining well above the Fed's 2% target.

Moody's has revised its outlook for private credit investment vehicles from stable to negative, citing a wave of redemptions and elevated leverage in publicly traded counterparts. Moody's notes that nontraded business development companies are facing an unfavorable dynamic unlikely to improve this year, with some funds imposing caps on withdrawal requests.