Speed Matters in Credit Market Downturns
When credit markets unwind, timing is crucial. JPMorgan Chase, with its conservative private credit practices, may be among the first to reduce exposure and trigger margin calls. Early movers often limit losses, as seen with Goldman Sachs versus Credit Suisse during the Archegos collapse, where slow reaction cost Credit Suisse $5.5 billion. Credit cycles punish slow responses, not analysis. As leverage rises and growth slows, the key question is: which banks will be last to adjust? JPMorgan may demand more collateral on private credit loans, signaling declining collateral values since origination. Source: Desiree Fixler @desireefixler
Another one!! $33 Billion Cliffwater Private Credit Fund limits redemptions to 7%, half of what came in Blue Owl, Blackstone, BlackRock, JP Morgan, Cliffwater... so what's going on?
Private credit funds limit withdrawals because their assets private loans are illiquid and rarely traded. When redemption requests rise, managers must either sell assets at discounted prices or cap withdrawals; most choose caps to protect remaining investors. Semi-liquid funds therefore offer higher yields but reduced liquidity, especially during market stress. Source: Barchart
This chart keeps deteriorating.
The major private equity houses have had their stock prices collectively lopped by more than a third, yet the S&P 500 sits 3% below record highs. Disconcerting. Source: Jeff Weniger, WisdomTree Afficher la traduction
Market action in fixedincome wasn't great yesterday.
Treasuries (upper chart) were a bloodbath yesterday with yields up 5-8bps (long-end lagging, now up 10bps on the week)... High Yield OAS spreads (lower chart) have begun to widen (credit underperformed stocks yesterday) Something to keep a very close eye on. Source: zerohedge
Glendon Capital warned that some private credit funds
especially those managed by Blue Owl Capital—may overvalue loans relative to market prices. For example, junior debt of Cornerstone OnDemand was valued near 90¢ while its senior debt traded around 78¢. Similar gaps appear for Barracuda Networks, Peraton, and Conair Holdings, suggesting possible future write-downs as stress grows in private credit markets. Source: FT
Returns since the start of the conflict
Source: Trend Spider
Energy sector up 25% YTD. Everything else red.
One sector carrying the market isn't a rotation. It's a warning. Source: Michael A. Gayed, CFA @leadlagreport
Oil Just Did the Unthinkable.
It didn’t just beat a crisis. It beat every crisis. Last week, WTI oil moved more violently than: • The Saudi price war of 1986 • The Gaza crisis of 2009 • Even the Covid demand collapse of 2020 In one week, oil experienced its biggest move in 40 years of recorded history. Source: Katusa Research @KatusaResearch
