Public Credit Market Is Past Peak Defaults, BlackRock's Lynam Says

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00:00Amanda Lynam of BlackRock writing this,

00:02we believe the peak in defaults in the public credit market is behind us.

00:06Amanda joins us now.

00:07Amanda, thank you so much for being with us.

00:08Thank you for having me.

00:09This is the big question, right?

00:10How much are people pricing to perfection credit

00:13at a time when potentially defaults are going to inflect upward?

00:17There's been a lot of debt issuance in the tech space,

00:19and there's a feeling that private credit has gotten a little bit heady.

00:23Okay, so I think there are a couple things to note.

00:25One is we often get asked in the corporate default market

00:28or corporate credit market when the peak in defaults is actually going to arrive.

00:32And what we point investors to is the data that actually shows

00:35in the leveraged loan market, for example,

00:37defaults peaked in November of 2024 at 7.7%,

00:41which is actually a fairly high number that's using Moody's data,

00:44issuer-weighted trailing 12 months.

00:46But the point is that we think the peak in trade policy uncertainty

00:50is likely behind us.

00:51We think the peak in growth concerns is behind us.

00:54And we think the peak in debt service costs headwinds

00:58from higher interest rates is behind us.

00:59So when you put those three things together,

01:01coupled with a good enough growth backdrop in 2026,

01:04it's hard for us to envision a new peak in corporate credit defaults.

01:08And again, keeping in mind that we've already had kind of this flush

01:11in 2024 because of the high borrowing costs.

01:15I think coupled with that, our view for corporate credit,

01:17both liquid and private, is one of dispersion

01:20but not widespread market disruption.

01:22And I think that's really the key point to keep in mind.