Post-Labor Day market conditions continue to favor credit issuance of all stripes. Rather than being hampered by uncertainty surrounding tariffs, inflation, growth or rates, borrowers and investors have decided these dynamics have been settled in favor of “risk on!”
What then are the real worries for credit? While lower rates and less chance of a recession have eased the pressure on balance sheets and financing expenses, this hasn’t prevented some observers from predicting higher defaults down the road. Digging more into the details reveals a more optimistic story.
Eric Rosenthal, KBRA’s default guru, spoke recently on the “Three Things in Credit” podcast suggesting that credit default rates for high-yield bonds, broadly syndicated loans, and private credit should remain at subdued levels for the foreseeable future...
“Spreads are compressed everywhere. The market is really reacting to a lot of strength on the demand side.” – Stephanie Doyle, portfolio manager, investment grade corporate strategies, JPMorgan Asset Management (Bloomberg).
Featuring Charts
Chart of the Week: Relative Compression
Private credit yields have narrowed since 2023, but less than for single-Bs. Source: KBRA DLD
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Chart of the Week: Tariff Drag
Growth forecasts for this year and next are well below last December’s estimates. Source: Oxford Economics/Haver Analytics
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Chart of the Week: All-Weather Buyouts
While direct lending was subdued with rate liftoff, it’s recovered despite tariff noise. Source: DLD KBRA
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Chart of the Week: Loans Unleashed
July set record monthly leveraged loan volume; eight of top ten highest in last two years. Source: PitchBook, Bloomberg
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Chart of the Week: Behind the Curve
Private equity fundraising through early June is slowest pace in over a decade. Source: PitchBook
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Chart of the Week: Exit Ramp
The number of PE exits slumped 1Q after last year’s steady improvement. Source: Preqin Pro
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Features
The Pulse of Private Equity – 9/8/2025
Rolling one-year PE fund returns Download PitchBook’s Report here. A review of desmoothed returns and the desmoothed nowcast over a rolling one-year horizon shows that PE fund returns significantly exceeded fundamental expectations implied by macroeconomic conditions throughout 2021 and 2022…. Subscribe to Read MoreAlready a member? Log in here...
Bloomberg: Leveraged Lending Insights – 9/8/2025
US Leveraged Loan Returns Cool to 0.32% in August Click here to access Bloomberg’s latest Global Leveraged Loan Index Report The Bloomberg US Leveraged Loan Index (Ticker: LOAN) returned 0.32% in August, bringing its year-to-date return to 4.00%. Average secondary market prices on US leveraged loans were 96.92 on September 9th after declining slightly from…
KBRA Direct Lending Deals: News & Analysis – 9/8/2025
Defaults: Roughly 40% of restructured HY issuers were in trouble again within 24 months Click here to learn more. Distressed debt exchanges (DDEs), the alternative medicine to bankruptcy when it comes to treating problem credits, have long been criticized as temporary band-aids that lead to another restructuring or Chapter 11 anyway. Investors aren’t wrong…. Subscribe
Middle Market & Private Credit – 9/8/2025
PIK Income Fell Modestly in 2Q25 for BDCs, Dividend Coverage Varies Click here to learn more. Payment-in-kind (PIK) income for Fitch-rated business development companies (BDCs) declined modestly in 2Q25 but remains above pre-2024 levels. This reflects persistent challenges in portfolio credit quality and the impact of structured PIK arrangements amid elevated interest rates. The latest…
Leveraged Loan Insight & Analysis – 9/8/2025
Near-term BDC loan maturities remain limited The loan maturity profile of BDCs, the most transparent part of the direct lending universe, is not pointing to any big deterioration in the near-term…. Subscribe to Read MoreAlready a member? Log in here...
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