A private credit default could trigger another “black swan” event that could freeze the private credit industry.

Junk-Loan Worry

Market Commentary

Dec. 26: A reason that the Fed will be cutting key interest rates is that U.S. companies are now defaulting on junk loans at the fastest rate in four years. Specifically, the default rate in the leveraged loan market, the bulk of which is in the U.S., rose to 7.2% in October. Many companies that have been refinancing low-yielding loans that originated during the Covid era are increasingly struggling to pay higher interest rates. Since banks are notorious for selling these leveraged loans to private credit firms, the possibility of a major default in the $2 trillion private credit industry is rising fast.

As I have warned in the past, a private credit default could trigger another “black swan” event that could freeze the private credit industry. All this could be possibly averted if the Fed aggressively cuts key interest rates in 2025.

Louis Navellier
https://www.marketwatch.com/articles/u-s-stocks-global-markets-tips-junk-loans-7079d9a7

h/t mark000