S&P: Convergence of Public and Private Credit Markets to Continue into 2025

S&P Global Market Intelligence released a report highlighting the convergence in public and private credit markets, titled Public and Private Markets Outlook: Converging on Credit._x000D_
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In this new report, S&P Global Market Intelligence’s capital markets analysts highlight how public and private credit markets have become increasingly intertwined in 2024, and why the trend is expected to continue in 2025. Public debt markets have grown, but not at the expense of the $1.5 trillion private markets, which continue their rapid expansion._x000D_
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“It may be no coincidence that the fall in credit default swap (CDS) credit events aligns with the growth in provision of private credit,” Gavan Nolan, executive director at S&P Global Market Intelligence, said. “Many companies now have recourse to lines of credit from private sources to an extent not seen in previous cycles. This trend is likely to continue in 2025 but may raise questions about the transparency and measurement of credit risk in private credit funds, where the exposure is ultimately shifted.”_x000D_
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Key highlights from the report include:_x000D_

The $1.5 trillion global private market continues to see new activity as banks seek out new partnerships. Meanwhile, fund managers are trying to enter public markets through new investment vehicles.

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Credit events in the CDS market have stayed low, with just two credit event auctions — the settlement mechanism for CDS — in 2024. This is the fourth consecutive year that auctions have not exceeded three annually and brings the three-year moving average down to the lowest levels not seen since the credit bubble before the global financial crisis in 2007 – 2008.

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With the size of the private credit market approaching $2 trillion, some regulators and investors are calling for more rules and transparency in the largely unregulated space.

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