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Weekly Market Summary
Aug 3 to Aug 7, 2026
Extra Credit*
- The private credit default rate declined to 2.51% in the second quarter, from 2.73% in the first quarter, according to Proskauer’s Private Credit Default Index. Defaults fell at both ends of the borrower-size spectrum: the rate for larger companies, defined as those with EBITDA of at least $50 million, decreased to 2.4% from 3.0%, while the rate for smaller borrowers with less than $25 million of EBITDA fell to 1.9% from 2.3%. Middle-sized borrowers were the exception, with their default rate rising to 3.4% from 3.1. The index covers 716 US senior secured and unitranche loans representing $195.6 billion in original principal.
- Distressed investors are optimists by nature, seeking value and opportunity where others see only risk. Recent conversations with market participants suggest that a meaningful distressed opportunity set could emerge in the second half of 2026, despite a strong US equity bull market and resilient economic backdrop.
- Beneath the supportive market backdrop, signs of stress are building in the leveraged loan index. The distress ratio by amount defined as the share of loans trading below 80 cents on the dollar rose 34 basis points in June to 6.87%. The ratio has trended higher over the past nine months after reaching a recent low of 2.59% in September 2025.
- The 2026 peak came in March, when six consecutive monthly increases pushed the distress ratio to 7.23%, its highest level since December 2022, when it reached 7.36% amid a series of Federal Reserve rate hikes. Software-related sectors account for roughly 45% of loans currently trading below 80, highlighting the sector’s disproportionate contribution to market stress.
Source: Pitchbook LCD. Proskauer’s Private Credit Default Index is a quarterly report by the international law firm Proskauer Rose LLP that tracks default rates for U.S. senior-secured and unitranche loans. The Morningstar LSTA US Leveraged Loan Index is a market-value weighted index designed to measure the performance of the US leveraged loan market.
Previous reports
*Source: Morningstar®, Bloomberg, Credit Suisse. OAS is Options Adjusted Spread. 4-year discount margin is used for spread for bank loans. Yield quoted is yield-to-worst or equivalent calculation. YTD Low / High for yields are based on end of week and not intraday movements. Indexes and sub-indexes: Investment-grade corporates represented by Bloomberg US Corporate Bond Index. High-yield bonds represented by Bloomberg US Corporate High Yield Index. Bank loans represented by Morningstar LSTA US leveraged Loan Index. The red and green arrows depicted under Yields, Option Adjusted Spreads, and Prices indicate a higher or lower value from the previous week.
Past performance does not guarantee future results. Index performance is not indicative of fund performance. Indexes are unmanaged and it is not possible to invest directly in an index.
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