Traders Snatch Up Derivatives as Risks Grow: Credit Weekly

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• Private credit default rates could reach 15%

  80% confidence

• There needs to be a material catch-up between the risks the market is worried about in private capital and geopolitics and the risks being reflected in high grade corporate bond spreads. This is a very good time to be looking at credit hedges.

  80% confidence

• X and xAI will repay the outstanding debt in full

  80% confidence

• Business development companies are sitting on a massive pile of leveraged loans which could be sold to meet redemption requests and push spreads wider

  80% confidence

• The concerns in the market are a ton of noise

  80% confidence

• We don't want to be in a position where we have to be reactive during a market downturn. The company is instead in a position to snatch up bargains if they arise.

  80% confidence

• Fund withdrawal limits are generally features and not bugs

  80% confidence

• If the US central bank eventually has to start boosting rates, credit could get hit

  80% confidence

• Bullish bets in credit default swap indexes have been eroding over the past few weeks amid anxiety over the software sector

  80% confidence

• War on its own doesn't tend to directly impact corporate bond spreads or returns, and valuations tend to be driven more by what the Fed is doing amid the conflict

  80% confidence

• Investors can still reposition for risks that appear skewed to the downside. Recent geopolitical events, along with AI, software and private credit, are increasingly interconnected. That's likely to create clearer winners and losers.

  80% confidence

• With record fundraising following the 2008 financial crisis, direct-lending vehicles have loosened their underwriting standards and are due for a default cycle

  80% confidence

• UBS forecast that private credit default rates could reach 15% was absolutely wrong

  80% confidence

• Doesn't see cause for concern in private credit, but the firm is watching closely to see if there's been too much frothiness

  80% confidence