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Bloomberg


The Credit Edge reviews the top credit news of the week and looks at the week ahead, with in-depth research of the most important corporate sectors, trends and themes. Analysis of specific corporate bonds and credit default swaps is backed by Bloomberg Intelligence's robust data sets and indexes.


The Credit Edge by Bloomberg Intelligence

Private lenders are going back to basics as debt trouble spreads, market participants tell Bloomberg News’ James Crombie in this special episode of the Credit Edge podcast. “Boring is beautiful, boring is better right now,” says Christina Lee, managing director at Oaktree Capital Management. The podcast also explores AI debt risks, software distress, how tight bond spreads can go and the state of US consumers with the following guests: Matt Brill, head of North America investment-grade credit at Invesco; Anish Shah, global head of debt capital markets at Morgan Stanley; Lotfi Karoui, multi-asset credit strategist at Pimco; Jody Lurie, Bloomberg Intelligence senior credit analyst; Na Wei, global head of leveraged finance at Barclays; Sheel Patel, head of Mayer Brown’s private credit practice in New York; Shalini Sriram, Third Point’s head of structured credit; and Scott Goodwin, co-founder of Diameter Capital Partners. Interviews were recorded June 3 at Bloomberg’s Global Credit Forum in New York.
 
 

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Oaktree Says Boring is Beautiful In Dicey Private Credit Market

Robust demand from pensions and insurance companies will support corporate debt through macroeconomic headwinds and record supply, according to Goldman Sachs. “Spreads are tight to the prewar levels when the facts on the ground have unquestionably become more challenging,” Amanda Lynam, Goldman’s chief credit strategist, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Robert Schiffman in the latest Credit Edge podcast. “That is this uncomfortable tension that we have in the credit market,” Lynam says. “Sentiment around the yield-based buyer is really in the driver’s seat.” They also discuss the AI funding boom, private-credit risks, CCC underperformance and where to find value in structured products.

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Goldman Sachs Sees ‘Uncomfortable Tension’ in Credit Markets

Bad software loans will cause credit-market trouble that recalls aspects of the global financial crisis, according to American Century Investments. “We call it max uncertainty with max complacency,” says Paul Norris, referring to tight credit spreads, in this episode of the Credit Edge podcast. “What’s interesting to me is the subprime crisis was very similar,” Norris, who leads the $330 billion asset manager’s securitized markets team, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Reto Bachmann. They also discuss growing risks to business development companies and collateralized loan obligations, advantages of public over private asset-backed debt and why residential mortgages are a buy.
 
 

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Veteran ABS Investor Sees ‘Max Uncertainty With Max Complacency’

Blue-chip companies, including hyperscalers, may be jeopardizing their credit ratings by piling on debt, according to Principal Asset Management. “We have seen some downgrades, and I would expect that that would continue as borrowing ramps up,” Mike Goosay, the $600 billion manager’s global head of fixed income, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Julie Hung on the latest Credit Edge podcast. “I don’t think that’ll have a behavioral effect on the way that investors look at the market, nor does it — to date, anyway — change the borrowing costs of those corporates,” he adds. They also discuss the artificial-intelligence funding frenzy, why junk bonds are attractive despite macroeconomic risks and how global government-bond volatility affects demand for credit.

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Principal Sees High-Grade Downgrade Risk as Issuance Ramps Up

Loose underwriting standards are increasingly troubling for private credit market participants, according to Bloomberg Intelligence. “This concern has been growing for a period of time,” David Havens, BI’s senior analyst for private credit, tells Bloomberg News’ James Crombie in this special episode of the Credit Edge podcast. Weak underwriting discipline was flagged by private debt market participants in a recent global BI survey, rising in prominence compared with a poll conducted in September. In addition, direct lenders face lingering pressure from retail redemptions at business development companies. “Headlines are still going to be negative, focused on that very small portion of the market — it’s becoming slightly infectious and weighing on the wealth side of the business,” says Paul Gulberg, a senior analyst who covers global banks and asset managers. The trio also discuss the drivers of private credit growth, loan valuations, the liquidity premium and fund fees.

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Private Credit Has a Weak Underwriting Discipline Problem

JPMorgan Asset Management sees value in the debt of companies building out AI, but it’s keeping a close eye on how much more they plan to spend next year. “If we’re seeing capex increase at the same rate that we saw 2025 to 2026, I think that’s probably a little bit of a red flag,” Stephanie Doyle, a portfolio manager at the $4.3 trillion firm, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Arnold Kakuda in this episode of the Credit Edge podcast. “I think the issuance is an opportunity,” said Doyle, who’s part of the money manager’s global fixed income, currency and commodities team. They also discuss the potential for credit spreads to tighten, rising net new bond issuance, the earnings outlook and growing macro risks.

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JPMorgan Is Wary of Another Big Leap in AI-Related Spending

Secondary trading of private credit is on track to more than double last year’s record volume, according to HarbourVest Partners. “Through the first quarter we’re run-rating above $50 billion this year,” Greg Ciesielski, the $150 billion global private markets firm’s head of credit secondaries, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Jean-Yves Coupin in this episode of the Credit Edge podcast. “It’s certainly a buyer’s market at the moment, which is what you generally see in dislocation,” he adds. They also discuss the impact of private credit stress on pricing, opportunities to buy assets from business development companies and how HarbourVest uses AI for valuation.

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HarbourVest Expects Private Credit Secondaries Volume to Double

Rookie private lenders that have to sell in a downturn are a potential threat to credit markets, according to Citi. “If the cycle turns and these tourists, rather than working out loans, just start selling them at below the economic value — what happens to the rest of the market?” Mickey Bhatia, the firm’s head of spread products, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Sam Geier in this episode of the Credit Edge podcast. “That’s a big worry,” says Bhatia. They also discuss global fund flows, investment in AI infrastructure and expansion of electronic trading to incorporate collateralized loan obligations.

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Citi Warns of Private Debt Risk as ‘Tourists’ Are Forced to Sell

Middle East shipping disruptions are boosting US companies bruised by cheap Chinese supply, according to Sycamore Tree Capital Partners. “It really slows down the ability for some of those Asian-based chemical companies to produce,” Trey Parker, the asset manager’s co-founder and chief investment officer, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Phil Brendel in the latest Credit Edge podcast. “You’re going to have more US- and European-based chemical companies have an inherent advantage,” Parker added. They also discuss health-care relative value, the outlook for debt defaults, a slowdown in liability management exercises and opportunity in credit secondaries.

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Sycamore Tree Tips Chemicals in Iran Jam

US companies with $770 billion in loans are hitting a wall as interest rates stay elevated, according to Davidson Kempner. “We’re in year three of what’s already the longest default cycle in 20 years,” Suzy Gibbons, the hedge fund’s head of research, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s David Havens in the latest Credit Edge podcast. “About a third of the market is stressed based on fundamental credit data,” she said. They also discuss liability management exercises, software defaults, distressed-debt returns and the broader impact of leveraged-debt stress on markets.

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Veteran ABS Investor Sees ‘Max Uncertainty With Max Complacency’

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