There is no doubt that COVID-19 and the volatility in the publicly traded markets have captivated everyone’s attention in recent months. Private credit markets are similarly dealing with unprecedented dynamics. This article reviews the historic magnitude of the dislocation and what might be in store for the future.
Although public markets function separately from the private markets, they act as an important barometer. First, they reflect investor sentiment and risk appetite. Secondly, they influence pricing on the private side and function as reliable indicators of new loan issuance. We have observed some common trends such as the widening in spreads and pricing and the deceleration in new issuance. The private-debt market tends to “lag” the liquid market in terms of pricing; however, this time private-market spreads reacted more rapidly.
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