Following the strong performance of 2024, credit markets are entering 2025 in a solid position. While at first glance, it may appear that risks are one-sided, given that spreads are near multi-year tights across several segments of the credit market, we expect the fundamental and technical backdrop to remain strong.
Still, we believe there could be some headline risk associated with the implementation of the incoming US administration’s policies—from tariffs, immigration, and fiscal policy—which could potentially inject more volatility into markets.
We expect the relationship between banks and private credit firms will continue to turn more symbiotic through strategic alliances. Initially targeted at the sub-investment grade market, we expect these partnerships will eventually extend to investment grade (IG) companies as well: While public IG funding is widely accessible, the lack of flexible financing solutions available today can create an opportunity for private credit providers.
Another key theme for the new year will likely be the rising demand for data center capacity and associated infrastructure, which we estimate will require more than $2 trillion over the next five years. Given the sheer size and unique characteristics of many of these projects, we think that bespoke, privately originated IG financing will be part of the capital solution to finance this investment.
As 2025 progresses, we expect investors will turn their attention to the next sub-investment grade maturity wall, with over $620 billion of high yield bonds and loans set to come due in 2026 and 2027. We saw some notable differences in the way many of the 2024/25 maturities were addressed, which could suggest a large opportunity for private credit to reprise its role as an alternative financing option for companies with upcoming maturities.
Our 2025 Credit Outlook is available here.
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