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The themes of early 2025 continued into the year-end: uncertainty around trade policy, geopolitics and conflict, combined with muted M&A activity, kept supply tight. Against this backdrop, tightening spreads drove a significant rise in refinancings and recapitalisations, resulting in the highest deal volume we have recorded.
Looking ahead, the conflict in the Middle East is expected to weigh further on investment and deal activity. March has already seen no high‑yield issuance and a marked fall in leveraged loan volumes. While private credit has historically stepped in when public markets slow, today's tight spreads, AI‑related uncertainty, and defaults beginning to materialise may test that resilience.
Even so, improved underwriting standards, disciplined documentation and the strength of direct lenders support a cautiously optimistic view. Although we expect some losses, we do not foresee a sharp liquidity withdrawal, with banks also regaining ground.
For borrowers, timing remains critical. With spreads still tight and rate rises now priced in, we expect refinancing momentum to continue.
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