US private credit defaults to ease in 2026, but fragility to persist, says BofA

The Punchline

According to BofA Global Research, private credit defaults are projected to decrease in 2026 as interest rates decline, yet the sector is deemed one of the most vulnerable areas in the U.S. credit market. The firm indicates that while defaults may lessen, underlying fragility in private credit persists.

Why You Should Read This

Understanding the anticipated changes in private credit defaults and the ongoing fragility of the sector is critical for making informed investment decisions in 2026.

Who This Is For

This article is relevant for institutional investors, credit analysts, private equity professionals, and fund managers who are focused on private credit markets and risk assessment.

Investor Implications

Investors may view the potential easing of defaults as a signal for cautious optimism; however, the persistent fragility in the private credit sector cautions against overly aggressive positions. Asset managers should closely monitor interest rate trends and the broader economic context that could impact credit quality.