Private Credit – Why Now? (First of a Series)

In recent weeks we’ve devoted considerable space to how the Fed’s Great Unwind and rate hikes have impacted the economy, capital markets, and private credit. We’ve also examined the backdrop for growth (or recession). Our economist friends have helped sift data to guide investors on where US and global economies are headed. Finally, we’ve analyzed how private credit terms are affecting both issuers and investors, particularly compared to public credit.

One issue of growing interest among investors is timing. It’s all very well that private credit attributes – lower leverage, higher yields, and tighter structures – are tilting the field towards debt buyers. But why not wait until terms improve even more? And then whatever landing – soft, medium, hard – happens is behind us and things go back to normal.

Market conditions are also lifting other boats. As our Chart of the Week highlights, leveraged loan spreads and yields have soared since the Fed began its inflation busting program. High-yield bond yields have kept pace with loans as lower secondary prices demand better economics on primary issuance.