Corporate and Private Credit: Spreads, CLOs, Defaults — 2026-09-20

Top developments

France’s Sovereign Risk Premium Breaches 100 Basis Points

On September 18, 2026, European markets closed sharply lower as the yield spread between French OATs and German Bunds exceeded 100 basis points. This widening is driven by growing investor concerns over fiscal sustainability and inflationary pressures in France, leading to a broader "risk-off" sentiment across European credit markets. The move has heightened scrutiny on European corporate issuers with significant domestic exposure or refinancing needs in the near term.

Private Credit Defaults Hit Record Highs Amidst Record Fundraising

Fitch reported that private credit default rates have reached their highest recorded levels, contrasting sharply with the sector's continued ability to raise capital. In the first half of 2026, the asset class raised $190 billion, even as BDC (Business Development Company) redemptions exceeded inflows for the first time, signaling growing liquidity stress among retail and institutional investors. The disconnect between record AUM growth and rising defaults has triggered increased regulatory focus on valuation marks and liquidity terms.

European High-Yield Default Rates Projected to Rise

Fitch forecasts an increase in default rates for Europe's most speculative-grade companies through 2026, with leveraged loan default rates already ticking up to 2.7% in August. This trend contrasts with the relative stability seen in earlier months and suggests that the "soft landing" narrative may be fraying for weaker balance sheets.

CLO Issuance Remains Resilient Despite Macro Headwinds

Despite broader market volatility, Collateralized Loan Obligation (CLO) issuance in Europe has continued unabated. Deutsche Bank notes that September issuance is "in full flow," with a robust pipeline including debut managers and established firms like Brigade and HPS pricing new deals. This resilience is attributed to strong demand for AAA-rated tranches and limited supply of new leveraged loans, which supports pricing.

Local view

In Germany, financial media outlets like aktien.news are highlighting the stark discrepancy in reported private credit default rates, noting that figures vary between 1% and 19% depending on the source and methodology used. This opacity is causing confusion among retail investors and fund selectors who are urged to scrutinize underlying loan quality rather than relying on headline yields. Meanwhile, French analysts at RYDGE GP emphasize that the widening OAT-Bund spread is not just a sovereign issue but is creating dispersion in corporate bond spreads, particularly for French issuers with floating-rate debt.

Context & numbers

• France-Germany Spread: Exceeded 100 bps on Sept 18, 2026.
• Private Credit AUM: Surpassed $2 trillion globally.
• H1 2026 Private Credit Fundraising: $190 billion raised.
• BDC Redemptions: Average redemption requests hit 12.1% in Q1 2026 for non-traded BDCs.
• European Leveraged Loan Defaults: Rose to 2.7% in August 2026.

On the radar

• Q3 Earnings Season: Upcoming earnings reports from major BDCs will be critical to see if NAV declines stabilize or if further write-downs occur.
• ECB Policy Meeting: Investors are watching for any shifts in guidance that could impact the Eurozone's high-yield market, particularly given the recent inflation data.
• CLO Reset Wave: A significant number of CLOs from the 2024 vintage will exit non-call periods later in 2026, potentially leading to a surge in refinancing activity if rates remain stable.