Navigating credit markets in 2026: “Don’t let the macro…

PodcastMaking SenseBen KinneySep 16

Credit markets are becoming more actively traded, but price discovery remains uneven, and large portfolio trades pose challenges distinct from those in rates. Kinney highlights data-center issuance, portfolio concentration, private-credit redemption gates, and the 2028–2029 maturity wall as issues investors must assess alongside signs of rising distressed credit. He argues that rates matter, but credit analysis should not be overwhelmed by the macro narrative; he expects data-center-related volatility to persist until issuance expectations become clearer.

Private Credit Fixed Income Market Liquidity

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Key Takeaways

Credit trading is becoming more electronic, but it is not simply following the rates playbook: investment-grade turnover reached an 18-year peak in the first half of 2026, weekly price discovery covered 98.7% of investment-grade CUSIPs and more than 97% of high-yield CUSIPs, and Kinney says large credit portfolio trades pose different challenges from Treasury portfolio trades. He also cautions that trades can be small and price formation is not continuous.

Kinney links roughly $300 billion in data-center-related issuance and investment-grade issuance up about 50% year over year to pressure on spreads, while noting that equity-market challenges and leveraged-position unwinds also coincided with the summer widening. He expects volatility to persist until investors are more comfortable with the amount of issuance to absorb, and says deal-by-deal scrutiny and potential concentration concerns could make the next supply round uneven.

Kinney says the 2028–2029 maturity wall is significant but manageable, noting that limited refinancing has begun for businesses seen as having enduring strength. At the same time, the share of high-yield debt trading at distressed levels is gradually rising despite exceptionally low June and July defaults, leaving open questions about how leveraged-finance workouts will unfold and whether cooperation agreements may be exhausted.

TECHNOLOGY

Credit Electronification — Electronic trading in rates expanded after the GFC, moving from Treasuries to most G10 rate products. Credit markets are earlier in that shift. Kinney says credit can learn from FX and rates, but will face different challenges and may follow a different path.

“I lived through that process in the rates market coming out of the GFC, where it went from just a market where we traded treasuries electronically to now we trade…”—

ECONOMY

China Capital Formation — Kinney describes capital formation in China as a key uncertainty and says North American investors may underappreciate the risks developing there. Different patterns of capital formation outside the United States could lead to stress over the next few years, though he is unsure those risks are fully understood.

“And then globally, how will you manage through some of these narratives in these new shifts?…”—

MARKETS

Credit Turnover — Investment-grade bond-market turnover reached an 18-year peak in the first half of 2026. Daily high-yield turnover remained below 1%, but was the highest since 2020. Weekly price discovery reached 98.7% of investment-grade CUSIPs and more than 97% of high-yield CUSIPs, up from 95% in high yield last year. Kinney says credit-market risk exchange now looks more like rates or equities, while noting that trades can be small and price formation is not continuous.

“So if you look at the turnover in the investment grade bond market, and the first half of twenty twenty six, that reached an eighteen year peak…”—

FX Policy Expression — Kinney argues that investors seeking to express views on policy uncertainty or divergence should use FX, particularly the dollar, rather than rates, because policymaking is noisy. He adds that fiscal issues could steepen the curve.

“This... And I don't think I'm alone in this view, but it strikes me that the clearer expression of this policy uncertainty or policy divergences, it's really an FX trade…”—

Portfolio Trading — Kinney says portfolio trading in credit matured quickly over the past couple of years but never became as important in rates. Executing large investment-grade or high-yield portfolio trades presents different challenges from trading a portfolio of U.S. Treasury bonds.

“It's the portfolio trading business that's come about fairly quickly, I'd argue, and has matured fairly quickly in the last couple of years…”—

FORECASTS

Data Center Volatility — Kinney expects volatility to persist until market participants become more comfortable with the ultimate amount of data-center issuance they will need to digest. He says it is natural that markets have not yet found a clearing price when issuance expectations have been revised in trillion-dollar increments.

“We've been revising our data center forecasts and the market's been revising expectations of data center issuance in trillion dollar increments…”—

Credit Price Discovery

Kinney says rising turnover and broader weekly trading have made credit price discovery more continuous, though liquidity and price formation remain uneven compared with rates and equities.

Credit Market Electronification

Kinney sees credit adopting lessons from rates and FX while facing distinct execution challenges, especially in large portfolio trades; Larocca describes JPMorgan's Beta One pricing and execution tools.

Data-Center Issuance

Kinney attributes summer spread volatility partly to market and positioning noise, but says investors will scrutinize issuance pace, deal structure, asset quality, and portfolio concentration as AI financing grows.

Private Credit Risks

Kinney says private-credit redemption gates and software exposure remain concerns, while the 2028–2029 refinancing wall appears manageable; Larocca and Kinney also highlight Financing Connect's collateral and workflow tools.

Distressed Credit Risks

Kinney contrasts strong headline economic conditions with uncertainty in software loans, rising distressed-market activity, future workouts, and differing risk appetites for China-related credit.

Macro Versus Micro

The speakers acknowledge rates as an important credit-market driver but conclude that investors should not let macro narratives overwhelm issuer-level analysis and fundamentals.